In a recent interview with CNBC, Jim Grant, founder of Grant’s Interest Rate Observer, discussed the current state of the bond market and what lies ahead.

“I’m startled at how low things are,” Grant said in reference to bond yields. He argued, “If the story is that we’re in a great deflationary threat, then certainly junk bonds have no business being so low.” Alternatively, he said, “if the gale force” of government stimulus money and the increased deficit present the biggest risks, then “certainly sovereign yields are much too low.”

According to Grant, normal price discovery is being flummoxed by the Fed’s stimulus activities and increased interest by international bond buyers. He noted that the current state is a result of “forty years of operant conditioning—inflation has not been a threat and bond yields have been falling since 1981. People have almost come to think that inflation is a physical impossibility,” he says, arguing that we’re seeing “ferocious inflation on Wall Street. Meaningful inflation for the bond market is happening before our very eyes and at the checkout counters.”

Grant concludes by reminding us that Wall Street’s attention span is “famously short” but that the current state can’t be erased simply because “people aren’t paying attention to it.”