TIPS Breakevens Indicate Inflation Expectations "Double" From Two Months Ago
Today the Fed monetized $1.6 billion in TIPS from across the entire curve, with purchases as recent as bonds due 2012 all the way back to 2040. Curiously, the most remarkable TIPS issue ever, the MY3 of 2015, issued this October which came at an unprecedented negative -0.55% yield, was not bought back. Actually, we take that back: that particular Issue is now trading at a huge loss to everyone who was so sure deflation was inevitable as recently as two months ago... Which judging by the entire TIPS curve is everyone. Below we present a compare and contrast from the TIPS breakeven as of October 13, which did not anticipate inflation for about 7 years, to today: the current breakeven is at about 4 years, as the herd has panicked and from all out deflation is now sensing that despite the Viceroy of the Printers 100% confidence that he will not blow up the world, it may be prudent to take the other side of the bet. In the meantime, the collapse in rates continues.
First, here is how the TIPS curve looked on October 13:
And here is how it looks today.
...And this is based on the deranged and highly manipulated Core CPI. Oops.