Long-term inflation expectations have climbed today but as noted specifically for the US earlier, recent large increases in nominal yields have mainly been from US real yields cranking higher.
US 5Y5Y inflation swaps are currently 4.5bp higher on the day (7.5bps over two days) at 2.58% for highs since mid-July, whereas Eurozone 5Y5Y inflation swaps are 1bp higher (5bps over two days) at 2.18% for highs since mid-Oct.
It’s a marked increase in inflation expectations for the US in particular, from lows of 2.34% prior to the FOMC’s 50bp cut in September. Longer-term perspective is helpful though, with inflation swaps still within ranges 1H24 and, in both cases but especially for the Eurozone, above pre-pandemic averages (see chart).
With US implied terminal rates at 3.8% (SOFR yields) vs sub-2% for the Eurozone (Euribor yields), there is wildly different perceived need for tightness in real rates (calculated from these long-term inflation expectations) between the two major economies.
US INFLATION: US: -EU: Latest Climb In Inflation Expectations Contained
Last updated at:Nov-06 18:01By: Chris Harrison
Inflation+ 1
Long-term inflation expectations have climbed today but as noted specifically for the US earlier, recent large increases in nominal yields have mainly been from US real yields cranking higher.
US 5Y5Y inflation swaps are currently 4.5bp higher on the day (7.5bps over two days) at 2.58% for highs since mid-July, whereas Eurozone 5Y5Y inflation swaps are 1bp higher (5bps over two days) at 2.18% for highs since mid-Oct.
It’s a marked increase in inflation expectations for the US in particular, from lows of 2.34% prior to the FOMC’s 50bp cut in September. Longer-term perspective is helpful though, with inflation swaps still within ranges 1H24 and, in both cases but especially for the Eurozone, above pre-pandemic averages (see chart).
With US implied terminal rates at 3.8% (SOFR yields) vs sub-2% for the Eurozone (Euribor yields), there is wildly different perceived need for tightness in real rates (calculated from these long-term inflation expectations) between the two major economies.
