Where Inflation Expectations Now Stand

Here’s something on inflation expectations from my friend Peter Boockvar, on the heels of this morning’s GDP release…

Irrespective of the GDP breakdown and after the in line wage and salary data, the 10 yr yield at 1.87% is where it was just prior to the releases on the heels of global sovereign bond weakness. The 2 yr note yield is at .89%, the highest since early June as the Fed gets ready to hike.

Since September I’ve been building the case against sovereign bonds for political, logistical and economic reasons. Looking at another rise in yields today, let’s look at just the inflation expectations in some major markets. The US 5 yr and 10 yr inflation breakevens are at the highest level since July 2015. The UK inflation breakevens are at the highest since April 2013. The euro 5 yr 5 yr inflation swap rate that Mario Draghi said he likes to look at is at the highest level since May. The Japanese 10 yr inflation breakeven is at the most since late June.


Peter Boockvar
Managing Director, Chief Market Analyst
The Lindsey Group LLC

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