Investors have been expecting another “Taper Tantrum” when the Fed starts hiking.

The term “Taper Tantrum” refers to the surge in US treasury yields (global government bond yields as well), in summer of 2013 when then-Fed Chairman Ben Bernanke put a spotlight on the wind down of Fed asset purchases (tapering off QE).

In February of 2014, the Wall Street Journal stated Last Year's Taper Tantrum May Have Been Taste of the Future.

The Journal cited a research paper on Market Tantrums and Monetary Policy.

Stimulus No Free Lunch

“When investors infer that monetary policy will tighten, the instability seen in summer of 2013 is likely to reappear,” warns the report.

“Stimulus now is not a free lunch, and it comes with a potential for macroeconomic disruptions when the policy is lifted,” the paper said.

The paper's authors are J.P. Morgan Chase economist Michael Feroli, University of Chicago professor Anil Kashyap, New York University's Kermit Schoenholtz and Hyun Song Shin of Princeton University.

Hell of a Payback, But When?

I certainly agree that stimulus is no free lunch and there is going to be one hell of a payback for all this stimulus, but when and where?

2015 Repeat?

On May 14, 2015, MarketWatch asked Is This a Repeat of the 2013 Taper Tantrum?

Let's take a look at a couple charts from the article.

Pace in Rate Rise

That may appear ominous, but who's to say 2015 follows 2013?

Here is a chart of 10-year treasuries yields as of today.

US Treasury 10-Year Yield

The latest rise looks hugely unconvincing to me. Indeed, there was a far steeper rise in 2012 than the MarketWatch article fails to show!

Let's take a look at the second MarketWatch chart.

Taper Talk 2013

That's interesting, but once again we need to hone in on current action.

Here's an up-to-date chart I just produced with data from Fred (Federal Reserve Economic Data).

US 10-Year Yield and Breakeven Inflation Rate