Breakeven Inflation Rates Hit Year-to-Date Highs

Breakeven inflation rates hit YTD highs, Treasury yields and swap rates climb once again. Bond markets picked up where they left off after the Veteran’s Day holiday, swap rates and Treasury yields continuing to climb in the aftermath of Wednesday’s CPI figure- 10-year Treasury yields climbing as much as 4 bps before settling in and closing modestly higher at 1.56%. Breakeven rates, a market-derived measure of inflation also climbed – 10-year breakevens cresting 2.70% to close at the highest level of the year.

Consumer confidence wanes in November as inflation fears rise. The University of Michigan’s preliminary sentiment index fell to 66.8 in November, down from 71.7 in October. The index was below economists’ expectations, which projected an increase to 72.5. The report commented that consumers are growing more concerned about rising inflation without adequate policies to curb increasing costs. Consumers expect inflation to be 4.9% over the next twelve months, the highest inflation expectation since 2008.

The week ahead. Next week will be a busy week for economic data. We will get our first look at November manufacturing data with the Empire State manufacturing index on Monday. Tuesday, October retail sales, October import & export prices, and November home builder data will be released. On Wednesday, October housing starts will print with the weekly data releases closing on Thursday with initial jobless claims and the Philadelphia Fed manufacturing index.