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Inflation Expectations Surge to Highest in More Than a Decade -Breaking


© Bloomberg. On Sunday, October 3, 2021, the U.S. Treasury Building in Washington, D.C., U.S.A. As the global economy heads into the fourth quarter of 2020, there are a growing number of headwinds. These will slow down the recovery from the recession pandemic and show that policy makers have misunderstood their benign view on inflation. Photographer: Samuel Corum/Bloomberg

(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.

©2021 Bloomberg L.P.

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Mike Robinson
Mike covers the financial, utilities and biotechnology sectors for Street Register. He has been writing about investment and personal finance topics for almost 12 years. Mike has an MBA in Finance from Wake Forest University.