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Stubbornly High Inflation Expectations

US TSYS
  • The 5Y breakeven sits higher than prior to the FOMC statement having more than reversed the initial 8bp decline.
  • It’s currently at 3.50% and circa 50bps higher than since the start of the war in Ukraine.
  • The latest move has come as real yields have fallen back 17bps from the initial high touched on the release of the statement/SEP.
  • Real yields of -1.33% are almost 20bps lower than after the Jan 26 FOMC despite since going ahead with rate liftoff and the dot plot median pencilling in six further hikes this year.

5Y Tsy nominal yield (white), breakeven (yellow) and real (green)Source: Bloomberg

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