If inflation remains 4%, the real after tax cost of capital to corporate borrowers is zero. (Pay 6% as a spread over 5% treasuries, deduct 2% as tax savings, real assets rise at least 4%, etc). There is a reason it takes ~9% rates to stop even 4-5% inflation.
The 10 year at 5% and the long bond at 5.25% are screaming sells. They are being bid by foreign central banks, who are getting creamed on the currency as well as price, and not making it back on the rate itself.
The closest past analogies are late 1980s - inflation 4-5% pushed IRs to 8-9% - or the late 1960s (bigger surprise to the bond market, but still sent yields to 7% by 1970).
Another analogy is the long financial cycle peak from 1968 or so. The Dow hit 1000, but was overvalued on bull market optimism. It went sideways on a roller coaster as the general price level soared. That socialized the losses incurred by excessive previous optimism.
I don't expect the same scale this time, though. Our monetary policy won't be as stupid as it was in the 1970s. Stocks were even more overvalued in 2000 than they were in 1968 or 1972. But I doubt we will see the bargains of 1982 again, or the IRs that created them. We will see rates in the 8-9% range before the economy rolls over, though.
Since that much is pretty clear, the best bet on the board is that the 10 year note will fall in price and rise in yield. Over 2-3 years that may go all the way to 8-9. But 6-7 is in the bag, one doesn't need to ride the last half of the move.
Maintenance requirements to be short 10 year note futures run $600 per $100,000 face amount. A move to 6-7% would see the future drop 7-15% on that capital value, or $7000 to $15000 per contract as the upside potential, even riding only the first leg of the move. Since it can move against you in the short term, in practice it takes more capital and less leverage can be used.
But it is a killer trade right now. Those foreign central banks pretending they have an endless appetite for long treasuries, at some point are going to cough, and when they do the payday will be sweet. And because the yield curve is flat, there is practically no "carry" to put it on.
From what I've been able to find, m3 growth may have spiked at 8% but it's been higher before without much inflation.
Same with gdp growth --it's up right now but it's been higher.
What you're saying makes a lot of sense but it hasn't seemed to make any difference in the past so I'm having difficulty understanding what's different now.