It's been a while since we've checked in on inflation expectations in the market for treasury bonds ant T-Bills. However, with recent expansionary programs everywhere like, such as the program lovingly named Quantitative Easing 2.0. Let's look at inflation expectations before, during rumors, and after the announcement (today...) buffered around the reports of US Fed Quantitative Easing.
According to our extensive research on Quantitative Easing on Google Timeline, the first rumors of QE2 hit the news on July 7th. I'm going to assume there were rumors before that, so a neutral day before QE2 would be something like July 2nd (a Friday). The Fed gave its most definite signal QE was coming on September 21st. November 3rd saw the Fed make the official announcement that Qe2.0 would repurchase $600 billion in securities. Let's look at July 2nd, September 21st, and yesterday, November 15 on the yield curve. The actual 'inflation expectations' are taken by subtracting the 'real yield' of the T-Bill from the Yield of the corresponding maturity length on the yield curve.
- Inflation Expectations in Percent/Year (US Treasury)
So, it looks like QE2 (we know, or some other thing which happened in the last 2 months) has juiced inflation expectations over the entire yield curve. When the rumors for QE2 were heating up with Fed announcements, only the 10 year and 30 year inflation expectations were slightly raised.
Your thoughts?
