Following a weak 10 yr note auction yesterday, the 30 yr results are soft too. The yield of 2.825% was 1-2 bps above the when issued and the bid to cover of 2.41 is below the previous 12 month average of 2.64 and the 2nd lowest since Aug ’11. Also, dealers got stuck with the most amount in the last 4 months of auctions. Bottom line, in addition to the rise in asset prices that central bankers have verbally engineered over the past few weeks, inflation expectations have moved higher too coincident with the rise in commodity prices. With the CRB index today at the highest level since May, the implied inflation rate 10 yrs out is at the most since mid April at 2.30%, up from 2.08% the day before Draghi said he was coming to the rescue two weeks ago.

Category: MacroNotes

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