(Reuters) —  For all the central bank assurances about the inflation spike being transitory, investors are struggling to look past the biggest annual rise in U.S. inflation in 31 years.

A stampede for inflation-protected Treasuries sent 10-year yields on such securities to new record lows below -1.2% .

That's roughly 70 basis points below this year's peak.

Wednesday's 1% dollar surge and an 11 bps rise in nominal Treasury yields has been followed up by Japanese data showing wholesale inflation at 40-year high. Wall Street took a beating unsurprisingly; the Nasdaq, laden with tech stocks sensitive to higher longer-term yields, lost 1.7%.

World stocks have stabilized though, after the previous day's 0.7% tumble, supported by news that stricken Chinese developer Evergrande had come good on bond coupons, dodging default for the third time in a month. The bonds in question have risen around half a cent in price.

While money markets are betting central banks will get more aggressive next year — the first Fed and ECB rate rises are now seen in July and September respectively — shares have for now at least support from the deeply negative "real" interest rates.

On an inflation-adjusted basis, 10-year U.S. yields plunged to a new record low below -1.2%, keeping alive the there-is-no-alternative or TINA narrative.

Cue, Bitcoin hitting new record highs and Amazon-backed EV firm Rivian valued at $100 billion after this year's biggest IPO read more .

And how worrying really is the inflation picture?

Forward inflation indicators may offer reassurance. Ten-year breakevens, the level of expected inflation, is 2.7% and 5-year breakevens are 3%. Well above the Fed target, yet nowhere near the current 6.2%.

European shares are opening weaker but companies from a range of sectors — Burberry, Siemens, Arcelor Mittal, Delivery Hero and Generali — continue to deliver upbeat Q3 earnings.

Finally, not much cheer for Britain where the economy grew 0.6% in September. It remains smaller than where it was in February 2020

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