Amid signs that 2019's slowdown in the US economy may be stabilizing, the US Treasury market appears to be flirting with firmer inflation expectations. It's too early to know if the latest dance with reflation is noise or a preliminary signal, but the recent U-turns in the market's implied inflation estimates deserve close monitoring in the weeks ahead.
Consider the market's inflation outlook based on the yield spread for the nominal 5-year Treasury less its inflation-indexed counterpart. This gap rose to 1.64% on Monday (December 16), a seven-month high, based on daily data published by