One term spread steepens sharply; only one spread has actually inverted. The five year inflation breakeven is falling. And risk is rising.
Category Archives: financial markets
Weekly Economic Activity in the UK, and Two Self-Inflicted Wounds
So far, the UK economy is plugging along, according to the OECD Weekly Tracker (through 9/17). But (understatement of the year), challenges have arisen.
Market Expectations for Fed Funds Target, pre- & post-August CPI Release
From CME FedWatch app, in the wake of the CPI surprise.
Inflation Breakevens: Common and Uncommon Shocks
Assuming unadjusted nominal-real yields are a good indicator of inflation expectations (see yesterday’s post for why maybe not), it’s interesting to see how market based inflation expectations have moved over the recent past (pre-today’s ECB decision):
Market Based Expectations of Five Year Ahead Inflation
It might be misleading to rely to heavily on simple inflation break even calculations, which show inflation over the next five years lower today than they were on the even of the expanded Russian invasion of Ukraine.
Guest Contribution: “Forecasting Real Activity using Cross-Sectoral Stock Market Information”
Today, we are fortunate to present a guest contribution written by Arthur Stalla Bourdillon, economist at the Banque de France. The views expressed herein are those of the author and should not be attributed to the Banque de France, Eurosystem or NBER.
Bank Lending, thru Aug. 17
Or, a post for Steven Kopits.
GDP and Ten Year Yield Forecasts: Messages from the Survey of Professional Forecasters
A remarkable downgrade in expected growth shows up in a large implied negative — and widening — output gap, even as forecasted long yields rise, according to the Survey of Professional Forecasters (released 8/12).
“The Impacts of Crises on the Trilemma Configurations”
Excepting international reserves, trilemma configurations were durable through the global financial crisis. From Aizenman, Chinn and Ito (forthcoming Open Economies Review, 2022) (also NBER WP No. 30406).
Inflation Breakeven and Term Spreads Adjusted for Premia
Expected inflation inferred from the Treasury-TIPS spread is tainted by risk and liquidity premia. The difference between expected future short rates and current short rates is also obscured by risk premia. Here are adjusted spreads: