One year inflation expectations, as tracked by the breakeven rate for U.S. Treasury Inflated Protected Securities (TIPS), have fallen to almost 0%, while the more often quoted two year rate plummeted to 0.7% (see chart). While longer-term inflation expectations have diminished, albeit at a much smaller magnitude, the spread between 2Y and 5Y rates has […]
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Breakevens
Rampant risk aversion, receding energy prices, and a USD rally have led to significant steepening in the short-end of the U.S. breakeven curve, with the potential for more to come ahead of next week’s CPI release (see chart). So long as risks in Europe continue to escalate and CPI growth comes in at or below […]