Inflation Expectations Are Falling in Bond Market
Based on the "breakeven rate," or the difference between 10-year nominal Treasury yields and 10-year Treasury Inflation Protected Securities (TIPS) yields, the bond market's expectation of future inflation has been falling over the last month, not rising. After peaking at 2.65% on April 11, the breakeven rate has been gradually falling, and dropped below 2.40% yesterday (Friday) for the first time since March 23. That's a 25 basis point drop in the breakeven rate over the last month.
HTs: John Makin over lunch in the AEI dining room on Thursday, and Paul Krugman (see his post here).