A world in which long bonds are regarded as a conservative type of investment, with stable and dependable real returns. The opposite happens when inflation expectations are not firmly secured.
In circumstances of incomplete credibility, an inflationary shock is more likely to be extrapolated far into the future, because inflation itself is more persistent, and because changes in the short-term rate are viewed as less effective in restraining inflationary pressures. In this regime, a policy tightening comes together with expectations of higher and more obstinate inflation in the future.