NFTRH+; Inflation Expectations

In looking at the chart of the ‘inflation expectations’ ETF (RINF, top panel) I notice its similarity to the the TIP/IEF ratio (middle panel) and dis-similarity to the TIP/TLT ratio (bottom).


So I dug further and went to the St. Louis Fed’s website and pulled the 10yr Breakeven inflation rate, which not surprisingly looks a lot like the first two items on the chart above.

10 year breakeven inflation rate

Conclusion? Use the 10yr (IEF), not the 20+yr (TLT) in inflation gauging. The disparity might have something to do with the Fed’s manipulations out on the longest dated parts of the curve. I used TIP/TLT in a previous update and so I want to get the above presented as well.

This helps keep us moderated (i.e. not going full frontal deflationist) as the overbought signals in items like the Silver/Gold ratio and the TSX Venture index hit extremes. According to the most commonly watched indicators, inflation expectations have not yet cracked and so the reflation trades are not technically over by this measure.