How have bonds been reacting to recent economic enthusiasm?
*The Wall Street Journal, by Daniel Kruger and Sam Goldfarb, January 8, 2018
”A measure of the bond market’s expectations for inflation crossed a key threshold in the past week, highlighting investors’ renewed economic enthusiasm.
The 10-year inflation break-even rate, which reflects the yield premium on the 10-year-U.S Treasury note over the comparable Treasury inflation-protected security, topped 2% on Tuesday for the first time in more than nine months, according to Thomson Reuters.
The break-even rate has climbed in recent weeks as investors bought treasury-inflation protected securities, or TIPS, and sold regular Treasurys, a typical strategy when they see a risk of rising inflation.
Signs investors are concerned about higher inflation aren’t confined to the bond market. Commodities such as oil, copper and aluminum – which are key industrial materials and often serve as bellwethers for the direction of consumer prices – are also rallying. So is gold, which has historically served as a store of value in times when inflation has been a concern. ”
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