29 Sep 2015
Treasuries aren’t buying what Yellen is saying on inflation
FXStreet (Mumbai) - The action in the treasury markets in the US indicates the bond traders do not believe what is being told to them about the inflation trajectory by the US Fed officials.
Last week, Yellen the Fed expects inflation to gradually rise back near 2%. Williams said on Monday he expects the Fed to increase rates this year. New York Fed President William C. Dudley said the central bank will probably act in 2015 and move rates higher gradually thereafter.
However, the treasures signal inflation expectations in the US are tumbling, with long- and short-term market forecasts for price gains down to their lowest levels since 2009.
Break even rate at lowest in 6 years
The difference between yields on five-year notes and similar-maturity Treasury Inflation Protected Securities (TIPS) , a gauge of expectations for consumer prices, fell below 1 percentage point Monday.
Moreover, the TIPS clearly shows the inflation expectations are moving in line with the drop in the commodity and stock prices.
Last week, Yellen the Fed expects inflation to gradually rise back near 2%. Williams said on Monday he expects the Fed to increase rates this year. New York Fed President William C. Dudley said the central bank will probably act in 2015 and move rates higher gradually thereafter.
However, the treasures signal inflation expectations in the US are tumbling, with long- and short-term market forecasts for price gains down to their lowest levels since 2009.
Break even rate at lowest in 6 years
The difference between yields on five-year notes and similar-maturity Treasury Inflation Protected Securities (TIPS) , a gauge of expectations for consumer prices, fell below 1 percentage point Monday.
Moreover, the TIPS clearly shows the inflation expectations are moving in line with the drop in the commodity and stock prices.