The 10-yr note yield is at 1.64% -- exactly where it was in February 2020 or before the pandemic meltdown.

What has transpired in the interim has been nothing short of extraordinary on so many fronts.

For our purposes here, some of the more notable changes include:

Approximately $5.3 trillion in new, debt-financed fiscal stimulus The Federal Reserve buying at least $80 billion per month of Treasury securities and at least $40 billion per month of agency mortgage-backed securities The Federal Reserve taking the target range for the fed funds rate to the effective lower bound and anticipating that it will remain there through 2023 The Federal Reserve endorsing a policy that prescribes an average inflation target of 2.0% The 5-year breakeven inflation rate moving from 1.64% in February 2020 to 0.16% in March 2020 and back to its current level of 2.53% (highest since July 2008) The development of several COVID vaccines with remarkably high efficacy rates that have been given emergency use authorization by the FDA President Biden introducing a $2 trillion infrastructure stimulus plan

Why the 10-yr note yield is only back to where it was before the pandemic crisis hit the U.S. in force is a subject of much debate.

Inflation expectations are clearly higher; the Federal Reserve has acknowledged that it wants inflation to run hot; the IMF is forecasting 6.4% GDP growth for the U.S. in 2021 (and 6% globally, which is the highest on record); and there is a glut of savings available for spending and satisfying pent-up demand.

To be fair, the labor market has a long way to go to make up the jobs lost during the recession, many businesses continue to be hamstrung by COVID restrictions, and there is a burgeoning sense that economic growth in the next few quarters is going to be as good as it gets.

Nevertheless, the degree of monetary and fiscal stimulus that has been provided in the U.S., and around the world, continues to work off the lag effect and should help things run hot in economic terms.

JPMorgan Chase CEO Jamie Dimon said in his annual shareholder letter that it is likely the U.S. economy will boom in 2021 and that the boom could easily run into 2023. He also surmised that there is "the not-unreasonable possibility that an increase in inflation will not be just temporary."

That would be a dynamic shift from where things stood before the pandemic when inflation was not a problem and when growth rates were typically less than 3.0%. How the Treasury market handles a new dynamic of possibly higher inflation rates and certainly higher growth rates remains to be seen.

It's back to where it started so to speak, but with the recovery momentum building, there is a not-unreasonable possibility that this recent downturn in longer-duration yields will only be temporary.

at pohare@briefing.com