Treasury Breakevens Highlight Expectations For Depressed Inflation Levels

Markets continue to rebalance following years of central bank intervention around the globe. Even markets enter correction territory the commentary around a September rate hike remains hot as ever. Today the 10-Year and 5-Year Breakeven rates for US Treasuries tested levels last seen in 2009, 2010, and Jan 2015. These rates represent what participants think inflation will be in 5 and 10 years.

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The verdict is still out on the Fed as participants make cases both ways for a rate hike.  Clearly with dissipating global growth, evaporation of commodity valuation and an annihilation of the oil complex the Fed will be hard pressed to raise the FFR range to 0.25-0.50.  Traders on desks who spoke with Benzinga continued to highlight the game theory probability that the Fed will hike rates to prove they are in control and not beholden to the circular thinking down the lines of "we should raise rates because the market expects us to" after feeding the market these expectations for months on end.  Jackson Hole at the end of this week most likely won't add any clarity as Chair Yellen is not going to be present.