Happy Monday from Copenhagen!

We have a six-month stopgap funding deal in place in the U.S. until September, but no new debt ceiling legislation.

So, despite a shutdown being avoided, we are not yet talking about a new mountain of debt. This is why I think the late-Friday reaction in bond yields was somewhat overdone.

On top of the debt ceiling situation, bond markets were spooked by the massive jump in inflation expectations in the University of Michigan survey. While the survey is partisan, to say the least, the move was also driven by independents now raising their assessment of inflation in the coming years.

A major gap is growing between survey-based inflation and measured inflation (SWITs, Truflation, and other metrics), which begs the question: Is the current inflation wave actual or just perceived? For now, it seems more like a “perceived” inflation wave rather than an actual one, and if it takes a while for tariffs to show up in shelf prices, we could be in for a pretty big recalibration back to normal.

Why this divergence? Probably because the media is FULL of tariff-related stories, while executives haven’t been sleeping under a rock. They’ve stocked up on inventories at pre-tariff prices and now find themselves sitting on full inventories amid a slowdown in U.S. consumption. That’s inherently disinflationary and could delay the net-net effects of tariffs.

Chart of the week: Is inflation real or just perceived?