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Wednesday, December 8, 2021

Long-term inflationary expectations in the bond market have skyrocketed.

Investors in the Treasury market, who strongly believe that inflation will be temporary, are changing their mindset.

A key indicator of bond market expectations for inflation over the next five years – known as breakeven – rose to a new high, briefly exceeding 3 percent on Friday. This means that investors expected inflation to average around 3 percent a year over the next five years, much higher than at any time in the decade before the pandemic. Indicators of inflationary expectations over longer periods, such as the next 10 years, also rose to multi-year highs.

Matt Phillips of the New York Times reports that inflation officials at the Federal Reserve are watching for signals from the bond market when deciding when to raise interest rates. Higher rates tend to slow inflation, but they can also lower stock prices and slow down hiring.

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Fed Chairman Jerome H. Powell and other central bank officials have said for months that the rise in inflation was a “temporary” result of supply chain problems caused by the pandemic, but there has been strong evidence recently that the price increases may be more serious. constant worry. The September CPI released last week showed prices were up 5.4 percent from the previous year – and slightly faster than they rose in August.

But analysts say a major concern for bond market investors is that prices seemingly unrelated to the pandemic have also begun to rise. First of all, it was the monthly rent, which tends to increase over long periods as soon as it starts to rise. From August to September, rents jumped 0.5 percent, the fastest growth in about 20 years.

World Nation News Deskhttps://www.worldnationnews.com
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