QE2 and Rising Yields, Again

Late last year I was making arguments like this one about how QE2 would work:

[T]he recovery view begins with notion that a successful QE2 will first raise inflation expectations.    The increase in  inflation expectations, however, also implies higher expected nominal spending (i.e. higher future nominal spending means higher future inflation).  Higher expected nominal spending in an economy with sticky prices and excess capacity should in turn lead to increases in expected real economic growth.  Finally, this higher expected real economic growth should increase current real long-term yields.  Given the fisher equation, this understanding implies that the rising long-term nominal yields are occurring because of both higher expected inflation and higher real yields.

Thus, contrary to the sales pitch made by Fed officials that QE2 would lower yields, we should expect to see yields ultimately increase if QE2 is successful.  Below is an updated figure on the 10-year expected inflation and 10-real treasury yield. (Click on figure to enlarge.)

 

[Update: the labels on the graph were original reversed and now have been fixed]

To the extent the sustained rise in real yields is reflecting an improved economic outlook, can we not attribute some of that improvement to QE2?