Market is bracing for higher inflation with rising rates and term premiums

From Investing.com: 2025-01-14 02:14:00

Rates rose yesterday, with the 10-year rate up to 4.79% and the 30-year rate at 4.97%. The 30-year minus 10-year spread increased to 64 basis points. Today’s report is expected to show another hot reading, with a 0.4% increase forecasted, and core reading expected to rise to 0.3%. Expectations for Wednesday’s report have also increased to 0.4%. Oil prices rose to $79 per barrel, with RBOB gasoline climbing as well. Energy costs are contributing to inflation fears, with two-year inflation swaps up to 2.70% and five-year swaps up to 2.61%. Inflation expectations and rising term premiums are driving higher rates, indicated by the 10-year breakevens rising to 2.47%. The Fed has benefited from low oil prices but now faces rising rates due to inflation concerns. Today’s PPI and Wednesday’s CPI reports will be critical, as short-term inflation expectations are climbing. Oil prices breaking downtrends signal a potential move higher.



Read more at Investing.com: Rising Rates, Term Premiums Reflect Market Bracing for Higher Inflation