May 20, 2022 15:17 GMT
- Today's growing rally in Tsys is driven entirely by lower breakevens, with real yields flat to slightly tighter and not offering any offset to souring risk sentiment.
- It helps see a further unwind of the recent rise in 5Y breakeven (currently 2.94%), contrary to recent partial correlation with oil prices as they edge higher.
- More interestingly, the 5Y5Y forward of 2.25% is down from 2.33% yesterday and now the lowest since early March as longer-term inflation expectations continue to trend lower.
5Y breakeven (white), 5Y5Y breakeven (yellow) and WTI 1st fut (yellow)Source: Bloomberg