Bond Market’s Inflation Bets Reach Highest in More Than a Decade
- For 5-year TIPS, breakeven inflation rate climbs to 2.92%
- 5-year TIPS auction draws record-low yield amid strong demand
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Bond traders are boosting expectations for U.S. inflation to levels not seen in over a decade amid concern supply-chain bottlenecks and resurgent consumer demand will keep lifting the cost of goods and services.
The breakeven rate for five-year Treasury inflation-protected securities surged Thursday to the highest since the maturity was reintroduced in 2004. The move was particularly striking as it coincided with the biggest-ever auction of the tenor. The $19 billion offering drew a record-low yield of minus 1.685%, below where it was trading before the auction, a sign that demand exceeded dealers’ expectations.