The-Year TIPS Breakevens

The measure of inflation that uses the spread between the yield on the Inflation Protected Treasury and the Nominal Treasury has come down from its high of 2.08% on 6/10. Disappointing PPI and CPI readings this week and a rally in the nominal coupons have eased concerns in the short term that, as you can tell from the graph below, have really spiked since mid-April.


The inflation trade is more of a long term play than some in the market might think. Sure, the market has been flooded with cash, but the recent run up was a little overdone for an event that is most likely a year away. A choppy market will likely persist while supply concerns for the Treasury market as a whole continue to ebb and flow.




Cliff J. Reynolds Jr., Junior Analyst