U.S. Inflation Expectations Hit Decade High as Yields Resurge
- Market proxy for 5-year inflation expectations exceeds 2.5%
- Focus turns to Powell Thursday for hint of pushback on yields
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U.S. Treasuries tumbled anew on Wednesday, driving long-maturity yields to their highest levels this week and pushing up inflation expectations as traders continued to price in a quicker economic rebound from the pandemic.
Benchmark 10-year Treasury yields surged as much as 10.3 basis points to 1.495%, a move reminiscent of last Thursday’s startling selloff in government debt. Meanwhile, a market proxy for the anticipated annual inflation rate for the next half-decade exceeded 2.5% for the first time since 2008 -- aided by climbing oil prices. At least part of the trigger for the fixed-income losses came from the U.K., which said it will sell more bonds than expected as its economy emerges from a deep recession.