Many sovereign bonds trade at a premium for being safe assets that retain their value even in deep recessions. This premium, or ‘convenience yield’, allows governments to borrow cheaply. This column argues that sovereign bonds remain particularly valuable in comparison to other assets, such as stocks, only in disinflationary demand recessions. In inflationary supply recessions, their real value erodes due to inflation and rising interest rates. Therefore, the recent resurgence of supply shocks has contributed to the erosion of the ‘convenience yield’ premium in sovereign bonds. This insight strengthens the case for fiscal prudence as well as for committing to restrained fiscal policy during inflationary recessions. […]