In April 1992, Australian Government Bonds yielded over 13.5%. The annualised inflation reading for the March quarter of that year was 8.7%. It had been well north of 5% for most of the previous 20 years and, given 13% government bond yields, there was an expectation that it would stay that way.
Fast forward 25 years and the world couldn’t look more different. In April 2015, the same 10-year bond yielded 2.5%. Despite interest rates approaching zero, inflation expectations have fallen dramatically.