Inflation Expectations Have Increased Since Mid-January

Since January 15th, 5-year TIPS derived breakeven inflation has increased 23 basis points from 105 basis points to 138 basis points. 10-year TIPS derived breakeven inflation has increased 16 basis points during this time and 30-year TIPS derived breakeven inflation has increased 8 basis points since the beginning of February.

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It will be worth watching whether or not today's widening of spreads (currently the 5-year treasury yield is 16 basis points wider and the 10-year is 12 basis points wider) will push inflation expectations higher. If inflation expectations move higher, the odds that the first rate increase by the Fed happens in June will most likely increase as well.

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