Tuesday, October 26, 2010
Deflation Disappears With Bond Market Showing Growth
Expectations for rising consumer prices have increased faster in the U.S. than any other bond market this month as central bankers made the case for monetary easing through additional asset purchases. Yields on 30-year Treasuries climbed as much as half a percentage point since September to 2.61 percentage points more than similar maturity inflation-indexed debt, the widest gap since May and an indication for anticipated gains in consumer prices.
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This is exactly what my post talks about. The Fed is definitely trying to increase money in the system by buying assets. The increase in the money supply will lead to inflation and an even higher yield on treasuries. Even though the current inflation rate is 1 %, it is expected to rise to 1.58 % on average for the next 5 years. Consumer prices are definitely going up in the future if the fed continues to buy more assets. Although I have to say that this is not a bad time to go bond shopping
ReplyDeleteI think that's what they are trying to do, increasing inflation, as you may have known that inflation in the US is rock-bottom low now, right?
ReplyDeleteI post a blog last week talking about how the Fed wanted to create some inflation. I will also agree that consumer prices are definitely going up in the future and this may be a good time buy some government bond as a mean of investment.
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