US 10-year breakevens at highest since May 19
The yield on US 10-year notes minus 10-year TIPS is a representation for what the market expects inflation will be in the next decade. It's certainly not setting off alarm bells but at 1.82% today, it shows that the Fed might want to start paying attention.
In my view, the Fed has completely taken its eye off the ball as it engages in every method of virtue signaling possible. Their main job is to control inflation and pledging to keep rates zeroed until 2024 at a time when house prices, manufacturing, commodities and government spending are accelerating is a risky move.
In any case, that chart looks like a big inverted head-and-shoulders pattern and if that's the case, the rest of the market is in big trouble because it targets +3% and we haven't been there in decades.
