Markets continue to behave as expected. Commodities are rallying while the dollar weakens.
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| CRB Commodity Index: White; Dollar Index (DXY): Green |
Inflation expectations continue to rise and longer dated treasuries are selling off, with the treasury curve steepening. However the longer dated treasuries have touched the lowest real yield level on record because the rising yield is not keeping up with the rising inflation expectations. Those holding US government debt are now expected to be losing nearly a percent per year when inflation is taken into account. It's difficult to comprehend how a money manager (including institutional investors) with any sort of a fiduciary responsibility be long treasuries at this point. Yet many still are.
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| Zero coupon 10y treasury yield minus zero coupon inflation swap rate (Bloomberg) |
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