The 10yr term premium has risen, as has the 5yr TIPS-Trsy breakeven, in the wake of Mr. Trump’s campaign to subjugate the Fed.

Figure 1: Ten year term premium, in % (blue). Light orange shading denotes period between Vought letter to Powell and Trump’s visit to Fed. Source: NY Fed. 

Figure 2: Five year Treasury-TIPS breakeven, in % (blue). Light orange shading denotes period between Vought letter to Powell and Trump’s visit to Fed. Source: Treasury via FRED. 

If Trump continues to browbeat the Fed into lowering the fed Funds rate, then the path of future nominal rates may be lowered, but higher expected inflation will tend to increase the term premium. Which dominates? That’s ambiguous. Believers in the Fisherian relation know the answer.