Economist

Richard Iley

Macroeconomics

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/044/166/original/Screen%20Shot%202018-02-10%20at%209.20.23%20AM.png?1518216783" class="editor-image img-responsive" data-smartkarma-image-id="44166"></figure><div class="content-highlight"><p>Equity markets are selling off largely because inflation fears have started to push bond yields higher. Unusually, the slump in equity prices have been accompanied by flat, even slightly higher, 10-year yields, over the last week or so. And it is clearly inflation expectations that have led the recent move higher in yields. 5-year/5-year forward inflation breakeven rates embedded in 10-year yields have risen some 20bp over the last month, accounting for the bulk of the step up in nominal yields…</p></div>

Equity markets are selling off largely because inflation fears have started to push bond yields higher. Unusually, the slump in equity prices have been accompanied by flat, even slightly higher, 10-year yields, over the last week or so. And it is clearly inflation expectations that have led the recent move higher in yields. 5-year/5-year forward inflation breakeven rates embedded in 10-year yields have risen some 20bp over the last month, accounting for the bulk of the step up in nominal yields…

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