Breakevens Surge as Traders Bet on Faster Fed Move After CPI
- Money-market traders bring forward first rate increase to July
- Biggest consumer-price jump since 1990 raises inflation risk
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U.S. bond market expectations for inflation surged after consumer prices in October rose at the fastest pace since 1990, sparking traders to accelerate estimates for when the Federal Reserve will hike its benchmark interest rate to tamp down inflation.
The so-called five-year breakeven rate on Treasury inflation protected securities -- or the difference between those yields and the ones on typical Treasuries -- jumped as much as about 14 basis points to around 3.13%, a record high. Traders increasingly see risk that the out-sized pace of consumer-price increases will prove more sticky than the Fed now expects.