"The Fed is regaining their inflation credibility, slowly. As they get inflation closer to the target, their long-run rate will again serve as a credible anchor for yields."

U.S. Treasuries surge, as investors seek out safer assets amid worries about U.S. banks and as economic data points to a softening labor market.

The divide between investors with trillions at stake reflects just how tough monetary policy itself has become, as price pressures remain high and readings of headline and underlying inflation send mixed signals.

"Another 100 basis points of Fed hikes from here means Treasury yields are going higher, especially the front end."