By Maulik Mody
The hawkish outlook of economists is evident in the 10-year breakeven rate, which reached a 3-year high of 2.66% at the end of last week and currently trades at 2.65%. The 5-year breakeven reached a high of 2.46%, its highest in 3 years.
The Treasury breakeven rate is the difference between the yield of Treasuries and TIPS (inflation indexed securities) having similar maturities which shows traders? expectations of inflation over years to come. The yield of TIPS is said to be real interest rate, as opposed to the return from Treasuries which is nominal rate.
The rally in the past ten days in the 10-yr breakeven rate is shown below (click to enlarge images):
Wide breakevens are a result of increasing oil prices given the unrest in the Middle East. Crude oil crossed $113 at the end of last week before falling slightly to $111.86 yesterday. As
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