Inflation expectations

By Peter Boockvar - June 26th, 2009, 10:58AM

While the CRB index is flat on the week, the implied inflation rate in the 10 yr TIPS has fallen 22 bps this week to 1.71%, the lowest since May 20th. It also coincides with the conventional 10 yr bond yield falling to the lowest since May 25th on the heels of the three solid bond auctions this week. Why is this? Inflation fears got ahead of itself (the y/o/y May PCE rose just .1% today)? The FOMC, while maintaining their current QE program, didn’t add to it and they also believe that inflation will remain subdued for some time due to ‘substantial resource slack’? Yesterday’s jobless claims data has traders worried again about the economy and the labor market and the deflationary implications, notwithstanding the upside surprise in durable goods orders on Wednesday? Or is it just a consolidation of the sharp move higher in inflation expectations over the past few months?

PERMALINK
Category: MacroNotes.

Comments

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

4 Responses to “Inflation expectations”

leftback Says:
June 26th, 2009 at 11:23 am
“Why is this?”

Because we are going to see a double dip – the bond market is predicting this before equities, as usual.
impermanence Says:
June 27th, 2009 at 12:08 am
If you are one of the tens of millions who have just experienced a 20-30% decrease in the value of your largest asset, you probably are not thinking, “inflation.”
Pat G. Says:
June 27th, 2009 at 10:27 pm
“that inflation will remain subdued for some time due to ’substantial resource slack’? ”

There is substantial evidence that exists that contradicts this correlation.
Even Stephen Says:
June 28th, 2009 at 10:07 pm
Ok we know that the Fed has been squirting in gargantuan amounts of money into the banks’ reserves. All that remains now is for borrowers, and lenders to begin doing business, and we have inflation.