Inflation Expectations Sagging

We have  been noting that a 10 year break even rate of around 1.6% was the line in the sand on a continued ‘inflation trade’ after the bounce.  The 10yr b/e has broken below it.  But one need not try too hard to imagine a potential Inverted Head & Shoulders with the right side shoulder possibly being constructed now.  It could extend down to 1.4% like the left side did.

10yrbe

In line with this, the daily view of the above indicator’s fellow, the TIP-TLT ratio, is in a bearish stance.

tip.tlt

While nominal TLT, usually a risk ‘OFF’ asset, is looking bullish.

tlt

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