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Long-Term Inflation Expectations Swing Back To More Typical Range

US
  • The swings in nominal yields today, with the belly and long end back near overnight highs after a >30bp rally and reversal for the 5Y, has come with sizeable moves in inflation expectations as well.
  • That includes even the 5Y5Y breakeven, off a low of 2.03% that had touched levels not sustainably held in the past two years and now back at 2.14% at more typical pre-Ukraine war levels.
  • The intraday move has come with a bounce in equities and with it, higher Fed rate expectations, back pricing a further 31bp of hikes over the next two FOMC meetings off lows approaching 10bps.

5Y5Y breakeven (white) and 5Y breakeven (yellow)Source: Bloomberg


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