The recent jump in yields does not signal the beginning of a major bear market for bonds but just an expected return to normality, a leading investor has told CNBC.
According to Didier Saint-Georges, managing director and member of the investment committee at Carmignac Gestion, the recent bond market reaction to a pick-up in inflation expectations is entirely rational.
"The move in rates is a bit of a normalization from a previous situation when the whole market was pricing in zero inflation forever," he said.
"So it's the minimum you can expect," the investor added.
10-year Treasury yields have been on a steady upward trajectory since reaching a low for 2016 of just under 1.40 percent in early July. On the day Donald Trump was announced as the president-elect, the yield spiked suddenly from 1.88 percent to 2.07 percent, before edging up in subsequent days to close at 2.23 percent most recently.
Saint-Georges emphasized that distinguishing structural from cyclical inflation is key in determining the likely trajectory for bonds, adding that what the U.S. is experiencing is cyclical.
In his words, "When you look at what's driving inflation it's not wages, what's driving inflation is rentals, it's health care costs...And it's the base effect on the oil price."
And while this kind of inflation can push the topline level, it is actually deflationary given that it reduces disposable incomes and therefore reduces purchasing power.
"It's the kind of inflation which does make sense - it's to be expected, it needs to be reflected but it's not the kind of inflation driven by demand which is going to push up inflation (into) a brand new trend," he explained.
This type of cyclical inflation has been edging up since March, says Saint-Georges, and Donald Trump's presidency could accelerate the trends which were already underway.
"Is this D-Day, is this the beginning of a major bear market for bonds? Are we going to see 10-year rates at 4 percent at the end of next year?," he asked rhetorically.
"I would argue that it's very unlikely and the key reason is global indebtedness - that's where the big deflationary pressure is coming from," he posited.
Another observer anticipating a cap on how high bond yields are set to move is Steven Major, global head of fixed income research at HSBC. In research published last week, his team said U.S. 10-year bond yields could move up to 100 basis points higher from its pre-election level to around 2.5 percent by the first quarter of 2017.
However, the analysts then expect a pullback to around 1.35 percent, as, according to the note, structural drivers are set to limit the country's growth potential and because "the new administration's policies will ultimately fail to deliver."