Inflation fears are rising fast, but the bond market is not buying the panic

On one side, households are bracing for another cost-of-living hit. Oil prices have surged, the Iran war has pushed energy security back to the front of the inflation debate, and traders are pricing in at least two more Reserve Bank rate rises this year. On the other side, the bond market is still behaving as though this shock will fade rather than entrench itself. That gap is where the real story sits.

The short-term inflation scare is real

The near-term message from markets is not subtle. One-year inflation swaps. . .