The energy on Capitol Hill today was apparent even through my CSPAN-tuned plasma TV. That’s because Federal Reserve Chairman Ben Bernanke walked into the proverbial lion’s den today as he made his first appearance before a House panel since Republicans took back majority control of the lower chamber. After watching the hearings for a bit, I have to say that I was a little disappointed that there weren’t too many fiery exchanges. I did, however, like the fact that several members of Congress sharply questioned the Fed chairman about inflation.

House Budget Committee Chairman Paul Ryan, R-Wis., said he is concerned that the Fed won’t be able to detect inflation until “the cow is out of the barn.” In my opinion, that homespun metaphor is quite accurate because once the inflationary inertia begins, it’s hard to hold back. Bernanke did acknowledge that inflation is surging in emerging market economies, but he didn’t seem to think that posed a risk to the U.S. economy. The nation’s top central banker also said inflation in the United States remains “quite low.”

One thing I’m sure Bernanke is watching closely these days is the meltdown in Treasury bond prices and, of course, the concomitant rise in bond yields. I’ve talked a lot over the past year about the market forces driving interest rates higher, and now we really are seeing that scenario take shape. Take a look at the chart below of 30-Year Treasury yields during the past three months. As you can see, yields have surged, and that’s pushed down the value of Treasuries significantly.

If you’re a bond holder, you had better hope that Bernanke is right about inflation. That’s because inflation is the bond holder’s worst nightmare. If bond investors even think there will be inflation, then we are going to see more and more bond selling. I mean, who wants to get a 3.5% return on a bond when inflation of 2%-3% per year basically could wipe out your return?

Bondholders also need to worry about the flow of funds away from bonds and into stocks. Investors in all kinds of bonds, but especially municipal bonds, have shown that they don’t have the appetite to hold these assets any longer. That’s been good for stocks, but bad for bondholders.

Since the beginning of the year, I’ve been saying that owning stocks just makes more sense right now than owning bonds. I still think that, and the metrics in the bond market during the past three months certainly help confirm my anti-bond, pro-stock bias.