Wednesday, January 12, 2011

Continued Fast Increase In Inflationary Expectations

It is difficult to believe that it was just 3 weeks ago that I wrote that the spread between regular Fed Treasury securities and inflation-protected ones had risen to 200 basis points. Now the spread is up to 227 basis points (as of this writing), as the nominal yield has gained another basis point, while the "inflation-protected" yield has dropped 26 basis points.

Compared to the pre-QE2 level, the nominal yield is up about 55 basis points, while the "inflation-protected" yield is down more than 50 basis points