Inflation expectations through Treasury breakevens – a concept we just visited – are a decent take on the market’s opinion on the ‘cost of holding money’. Mortgages are, of course, the standard means by which people acquire houses – usually borrowing money for 30 years to pay off the cost of a home (see some […]
One series that DQYDJ likes to follow quite often is the market’s current stance towards expected inflation over the next 5-30 years. It’s an easy calculation to make – you subtract the real, inflation adjusted yield from non-inflation adjusted yields – the missing factor is ‘CPI‘, or what CPI the market expects over the next […]
On Monday, we discussed how to quickly determine the rough inflation expectations in the general market, at least when it comes to CPI. We also linked you a calculator we built which calculates inflation expectations over various timeframes. All that is well and good – but what can you actually do with that information? Therein […]
It’s been a long time since we’ve turned our eyes to expectations of inflation, but we’re here today to do that very thing. Finally. Or something like that. Using The Treasury Yield Curve The simplest way to gauge inflation expectations is a classic – merely take the long term rates for long dated treasuries and […]
One of the longest running series on this site is market inflation expectations. We wanted to ease that math for us and you a bit, so we built this inflation expectations calculator. In those articles we use two long running daily treasury reports – constant maturity treasury rates and real yields, and subtract them to […]
Have you been paying attention to the mortgage market lately? That’s one of the reasons why we’re around… to keep track of these things! We’ve been watching the recent mortgage rate spike with a bit of curiosity (and our fingers crossed) as we’re planning on taking advantage of a refinance on our primary home. Looking […]
Every few months, we here at DQYDJ like to check in on the market’s expectations of inflation. There are lots of variables in the market – not least of which is the ending of the Federal Reserve’s open market purchase of bonds known as Quantitative Easing 2.0. Still, even with the conflicting signals of historically high gold prices, ridiculously low mortgage prices, and out of control commodity prices, the market isn’t pricing out of control inflation. As a matter of fact, the inflation that it is pricing in is decently low. Enough rambling, let’s take a look.
We haven’t looked at inflation expectations since November 15! Quantitative easing, historically low interest rates, and a rise in consumer spending haven’t been enough to increase inflation past a tame (again, historically low) 0.7% since December of 2009. However, we live in the real world and even if we were spared from inflation’s clutches today, we might not be so lucky in the future. On that note, let’s look at the market’s inflation expectations – which we calculate by subtracting the Treasury’s Daily Real Curve Rates from the Daily Treasury Yield Curve.
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.
I haven’t recently taken a look at what the Treasury market is telling us about inflation… but that’s now changed, and I’m here to share with you. The market predicts continued smooth sailing on the currency front. My method is the very crude subtract real treasury yields from the yield curve. Currency stability is probably here to stay in the meantime, what with the only reasonable alternative in flux and everything… and the market reflects that truth.