Inflation expectations in the 10 yr TIPS today are spiking by 10 bps to 2.36%, to the highest since May 3rd and it’s the biggest one day move since Sept (Sept was on a closing basis). Looking at the 5 yr TIPS has the same message, rising 8 bps to 1.97%, the highest since also early May. The 5y5y inflation breakeven is up by 14 bps to 2.96%, a one month high. Specifically since Aug 26th, the implied inflation rate in the 10 yr TIPS is up by 79 bps while the conventional 10 yr is higher by 100 bps. Thus, the rise in interest rates has been a mix of expectations of better growth but certainly also of higher inflation and, right now unquantifiable, likely concerns over debts and deficit.

Category: MacroNotes

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

5 Responses to “Inflation expectations spiking today”

  1. machinehead says:

    After six weeks of QE2 disastrously driving yields higher, the Fed saw no need to rein in the program, or even acknowledge the damage it’s doing.

    Earth to Beauzeau Ben: you’re an idiot, man.

  2. chubbco says:

    Alternate explanation, somewhat more benign, @machinehead: if you think that economic activity will pick up, you might think there will be more demand for credit and maybe more demand for goods and services and maybe increase in prices. Those are good things, within reason. If you thought that, you might think about buying TIPS now.

    The alternative is deflation. And I don’t think you want that.

    (NB: the deficit-busting Republicans who want to give rich people more money and break Social Security by hiving off part of employee FICA garner into a general fund obligaton neither my respect nor my vote.)

  3. holulu says:

    I know there are fellows here who are smarter than me.
    Educate me please. Why after QE2 yeilds went higher?

    Is it because bond investors realized that BB is going to delute their investment and started selling? What is the reason?

  4. gman says:

    We are ALMOST getting back to trendline inflation, an all around good sign for the economy.

  5. says:

    Bernanke is an effing moron.