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Market Mind: When to Expect Inflation

File Photo: December 8, 2018, shoppers at King of Pracha Mall, the largest retail shopping space in the United States, located in King of Prasha, Pennsylvania, USA. REUTERS / MarkMakela / File Photo

September 28, 2021

See the day before from Sujatarao

On Tuesday alone, 10-year Treasury yields have already risen eight basis points this week, and government borrowing costs have risen globally since last week’s hawkish central bank chorus.

Even more interesting is the inflation breakeven move, which reflects the bond market’s expectations for future price increases. The US dime breakeven rose almost 5bps yesterday and 10bps last week. These movements are also seen in many developed countries, including Germany and the United Kingdom.

That’s probably not all that surprising, given that Brent has exceeded $ 80 a barrel and the energy shortages and soaring gas prices that are rapidly supplying the crude oil market are widespread.

There is growing concern about penetration into other parts of the relevant economy. China’s power shortages have already shut down production in many factories, potentially putting further pressure on the global supply chain.

Investors say rising yields are still not enough to upset the story of TINA, which has continued to rise in stock prices. Although Wall Street futures are declining, the European market appears ready for a stronger session. This is especially true in the Nasdaq market, where tech stocks are hit hard when yields are rising.

From Fed Chair Powell to Andrew Bailey of the Bank of England to Christine Lagarde of the ECB, you’ll hear some policy tycoons later on Tuesday.

Meanwhile, China’s PBOC has pledged to help homeowners and succeeded in calming the water. This has led to a rise in listed stocks in Hong Kong and the mainland, including real estate companies that have been hit hard by the Evergrande problem, which appears to be facing default.

But … can the US also go to default?

With three days left before the U.S. government runs out of money and less than a month before the Treasury runs out of borrowing rooms, the Senate failed to approve a move to suspend debt caps on Monday. The quarrel continues.

Breakevens https://fingfx.thomsonreuters.com/gfx/mkt/klvykgllnvg/Pasted%20image%201632813010152.png

Major developments that need to provide more direction to the market on Tuesday:

-Chinese industrial enterprise profits slowed for 6 consecutive months

-Britain put troops on standby to refuel

-ECB President Christine Lagarde speaks

-Federal Reserve Board Chairman Jerome Powell Addresses Senate Banking Commission

-US Treasury Secretary Janet Yellen speaks

-Emerging Markets: Morocco, Kenya Central Bank Conference

-German consumer sentiment

-BOE Consumer Credit

-US corporate and consumer inventories

-Auction: 7-year Treasury auction

(Report by Sujata Rao, edited by Karin Strohecker)



Market Mind: When to Expect Inflation

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