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John Authers

Bond Whiplash Raises Risk of a Financial Market Accident

A dramatic shift in inflation sentiment has caused turbulence in real yields and breakevens, threatening losses for leveraged investors.

This may have been overly abrupt.

This may have been overly abrupt.

Photographer: MicroStockHub/Getty Images

The latest running inflation indicators are out. There’s been a dramatic shift in market sentiment over the last few weeks, as I’ve been documenting. That responds to a steady build-up in evidence that the current bout of inflation is more than transitory. The indicators clearly show that pressure is widening. However, they also show that this is a gradual process and could be far worse. Markets reached a tipping point in October, but for no clear reason.

As a reminder, the heat map has 35 rectangles, each covering a different indicator. The bluer the color, the higher that indicator is in comparison to the norm for the last decade (when inflation has been emphatically under control), and the greater the evidence the economy is shifting to a different inflation paradigm. Here is the latest: