(Bloomberg) — The latest rise in commodity price has led to market expectations that the U.S. would experience inflation in the second half of the decade.
Some U.S. Treasury yields reached multi-month highs this week. This has meant that demand for inflation-protected Treasuries has kept yields stable. This is the inflation rate that must be applied to bring their yields even.
For five-year maturities, the regular Treasury note’s yield reached 1.192% Wednesday, the highest level since March 2020. At -1.70% for five years, the TIPS yield may be record-setting at $19 Billion if securities are sold ahead of time in New York.
This Thursday’s 2.86 percentile point difference between rates was the largest since 2005. The 10- and 30-year breakeven inflation rates hit multiyear highs also this week.
“Although there will be plenty of evidence that current inflation pressures are transitory, what we do see is a higher inflation rate on average next year than we’ve been used to for the last decade,” said Peter Chatwell, head of multi-asset strategy at Mizuho International Plc. “That’s the paradigm shift.”
Although oil fell on Thursday, it is still close to a seven year high.
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