How long will the bond market tolerate losses?

"Across the world, stock markets partied as the deadly virus spread in 2020, but there are at least three reasons to expect the revelry to end," wrote Ruchir Sharma. Central banks and governments have poured record amounts of monetary and fiscal stimulus. The balance sheet of the US Federal Reserve has climbed over $7.5 trillion. "Since late 2008, central banks have cut interest rates, and printed and pumped huge amounts of money into the global financial system," and "governments have borrowed more and upped their expenditure to pump prime economic growth," wrote Vivek Kaul. All this excess money has created asset price bubbles across the world. The US government spent $2 trillion on a stimulus package to support people who lost their jobs and a lot of people invested in stocks as they sat at home. "Nearly 20% of the dollars in circulation were printed in 2020," wrote Sharma. "The consensus forecasts put 2021 GDP growth at just over 5% worldwide, and near 6% in the United States. I think growth could top 6% worldwide and approach 8% in the United States..." "The belief is that supply will not be able to keep up with the increasing demand and this will lead to more money chasing the same set of goods and services -- in the process, pushing up prices or leading to higher inflation," wrote Kaul. Sharma agrees and thinks "a sharp rate rise could deliver a disproportionately large shock" to financial markets. "Warren Buffett has called the future of bond investors bleak in his recent annual letter to investors," wrote Aparna Iyer. He means that as inflation rises, bond prices will fall as people demand higher yields. "The 10-year US Treasury yield jumped Friday after the February jobs report topped expectations, sending the benchmark yield to its highest level this year, before retreating as the day wore on," reported CNBC. "Treasury Secretary Janet Yellen played down any concern that the recent surge in US government-bond yields reflects expectations for an outsized breakout in inflation," reported the Mint. "While Buffett sounds downbeat, Shaktikanta Das, India's central bank governor, is optimistic." He has been "trying every possible trick to keep yields from rising," but, "India stands to lose more given that inflation here is higher compared with most other emerging market peers." Oil prices jumped yesterday to their highest levels in 14 months "after OPEC and its allies agreed not to increase supply in April as they await a more substantial recovery in demand amid the coronavirus pandemic". As the third largest oil importer in the world, the Indian government warned that it would undermine consumption led recovery. Prices of food and fast moving consumer goods (FMCG) are bound to go up because of higher input costs, said Madan Sabnavis. Already, prices of manufactured goods are being increased to balance costs of transport. The government is celebrating collection of Rs 1.04 billion every day through toll collections on cars and trucks. Despite a near complete cessation of business activities due to the coronavirus lockdown the government is on course to collect the same amount of GST as in 2019-20. This can only be because of high prices or high tax rates. Which add to prices. Inflation is inevitable. The government wants to extract as much taxes as possible and for prices to stay very low so that RBI can keep borrowing costs at basement levels. An impossible trinity.