While the FED, US Treasury and the deflationist camp are continuing to suggest there is little risk of inflation (albeit inflation getting out of control) in the “foreseeable future”, the bond market itself (the crowd) is beginning to suggest to the contrary. Whichever way you look at it, spreads between the yields of long dated and short dated US Treasuries are close to breaking to multi-week highs. A breakout would suggest positive momentum for inflation expectations.
US 2yr vs. US 30yr
US 5yr vs. US 10yr
Given the behaviour of commodities and in particular Gold and Silver we believe it is only a matter of days before inflation expectations reach a multi-week high, and this implies that long dated US Treasuries are set for some heavy selling pressure over the coming weeks. We would not be surprised to see the ETF TLT reach a multi-week low over the coming days (below the 90 level) and crude oil at a multi-week high (above $82).
Of course goodness knows what will happen once the US 30yr trades at a multi-week low!
