Bond yields will stay high and the Fed's war on inflation isn't over yet, Harvard economist Ken Rogoff says

• Elevated bond yields are likely to become the norm, Ken Rogoff has warned.
• Ten-year US Treasury yields have surged to their highest level since 2007 in recent weeks.

Bond yields will likely stay high for a long time and the Federal Reserve's battle against soaring prices is nowhere near over, Harvard University professor Ken Rogoff has warned.

The former IMF chief economist said Wednesday that he expects real rates – the actual return on a bond or loan, taking inflation into account – to remain elevated for the foreseeable future.

"I'm definitely in the school that they're going to stay high as far as the eye can see," Rogoff told Bloomberg TV.

Ten-year US Treasury yields have surged to their highest level since 2007 in recent weeks, while longer-duration bond prices have tanked in a crash ranks among the worst in history.

Investors are seeking better returns on government debt due to lingering deficit concerns, while the expectation that the Fed will have to keep interest rates high in order to kill off sticky inflation has also driven the sell-off.

"There are a lot of fundamentals pointing to higher real rates," Rogoff said, citing the US government spending more on defense and the green energy transition as factors that will drive up borrowing costs.

"As for inflation expectations, the Fed's trying to anchor them but it still has a fight ahead," he added.

This isn't the first time Rogoff has predicted that investors are going to have to come to terms with higher bond yields. In June, he said that 10-year Treasury yields were pay out returns of 4% for the rest of the 2020s.

Since he made those comments, returns on the benchmark bond have spiked by 90 basis points to 4.58% as of Thursday, with multiple top investors expecting yields to top 5% in the coming weeks.