With commodity prices, inflation expectations in further

The rise in the implied inflation rate in 10 yr TIPS today is back down to the close of the day the Fed announced QE Tres on Thursday the 13th at 2.47% after rising to as high as 2.64% on a closing basis after. Inflation expectations 5 yrs out is at 2.19%, above the 2.14% closing level on Wed the 12th but below the close the following day of 2.26%. The 5y5y forward breakeven is in as well but less so at 2.9% vs 2.78% the day before the Fed’s move. It was as high as 3.05% intraday in the days post Fed news. The obvious factor in the change of heart over the past week is the drop in the CRB index which is today at a one month low as economic factors temporarily outweigh monetary ones. When the dust settles though, the only thing the Fed will leave us I believe is stagflation.

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