TIPS Breakeven Rate Falls to Five-Month Low
The "breakeven rate" - the difference between 10-year nominal Treasury yields and 10-year Treasury Inflation Protected Securities (TIPS) yields - is one market-based measure of expected future inflation. As of yesterday the breakeven rate was 2.20%, down 45 basis points from the recent peak of 2.65% on April 11, and the lowest level since mid-December last year (see chart above). This downward trend in the breakeven rate suggests that inflationary expectations in the bond market have been moderating in recent months.
am I wrong to think that maybe the fed is buying all the bonds and distorting the market?
ReplyDeletehal-
ReplyDeleteno. you are not wrong.
qe2 is going out with a huge surge.
also:
this tips rate means nothing. if you are actually worried about inflation and have even moderate sophistication, you would never use tips as a hedge because they are pegged to CPI which no longer measures inflation.
The ETF TIP is up over 4% for the year. It is made up of intermediate term TIPS and yields about 2.75%.
ReplyDeleteMorganovich:
ReplyDeleteI suspect this isn't all the work of QEII. We are benefitting mightely from being the world's reserve currency and from Europe and Japan looking to be in much worse shape. I suspect the willingness to discontinue QEII may be bolstered by this increase in demand. The Fed figures bond investors will do its QEIII for it.
Oil Products Demand is Down 5% in the last 4 wks compared to same period last yr.
ReplyDeleteWe are in, or right on the verge of, Recession.