The widely followed 5-year Treasury market's implied inflation forecast fell to a six-week low ahead of Friday's April update on the Consumer Price Index ((CPI)). The softer outlook for pricing pressure could be noise that's linked to the US-China spat over trade. Alternatively, the market is pricing in higher odds that the already subdued inflation trend is set to ease further in the months ahead.
The yield spread on the nominal 5-year Treasury less its inflation-indexed counterpart (black line in chart below) ticked down to 1.75% on Wednesday, May 8 - the lowest since March