Inflation expectations in the bond market

While gold continues powering upwards the US Treasury market is not confirming similiar concerns about inflation.  (If gold is climbing due to uncertainty regarding the entire paper fractional banking monetary system is another matter)  Looking at the comparative yields of nominal versus inflation protected bonds (called TIPS) issued by the US treasury is illuminating. 

As you can see inflation expectations in this market are actually lower now than before this crisis erupted in 2008.  If the bond market was truely concerned with inflation you would see the implied breakeven inflation rate go up, not down. 

Inflation update

A little inflation update for you.  The CPI inflation numbers and its various components were released today.  Click on the picture at right to examine three sections of the inflation number:

The graph is of  year over year percentage change to reduce seasonal fluctuations. 

CPI for all urban consumer in blue

CPI less food and energy in red

CPI housing component in green

Both headline CPI and the housing component are in negative territory (that's deflation folks) and the CPI less food and energy continues the slow drop towards zero.  The housing component has never been negative until this current recession since the data series began in 1967.

Hugh Hendry and Eclectica fund August 2009 commentary

I ran across Hugh Hendry a several weeks ago and enjoy his irreverant style.








The Great Debate right now is inflation versus deflation and Mr. Hendry falls in the deflation camp.

Here's the August 2009 Eclectica commentary which he manages.

Hugh Hendry is also very bearish on China.





Mr. Hendry's positions are quite contrary. How many of his predictions come true will be interesting to observe.