Assuming no change by days end, the implied inflation rate in the 10 yr
TIPS is about to close at its highest level since late Sept at 1.595%,
exceeding the recent high of 1.58% 1 1/2 weeks ago. The price movement
today follows the action in the stock market in the belief that the
Fed’s aggressive (for better or worse) policies will be successful in
inflating our way to a better economy but watch over the next few
quarters if we reach a disconnect at some point where inflation concerns
remain sticky and the economy fails to gain any traction due to a
cautious consumer, aka stagflation. The selloff in bonds today is also
sending the FNMA 30 yr mortgage coupon back higher to 4% for the first
time since May 8th. There will be no free lunch.
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