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Market Expectations Maintain Highs

US
  • U.Mich inflation expectations for one year ahead jumped from 4.9% to 5.4% (highest since 1981, consensus 5.1%) as personal finance fears from a drag on real incomes pushed sentiment to the lowest since Sep-2011.
  • However, and importantly, long-run inflation expectations were unchanged at 3.0% having dipped a tenth in Feb.
  • The report did little to change market-based inflation expectations, which had already increased sharply on the day to stand near recent record highs in the case of 5Y and 10Y breakevens.

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

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