US inflation expectations hit 10-month high

The US 10-year Breakeven inflation rate (the difference between the 10-year T-yield and yield on the 10-year treasury inflation protected securities) rose above 2 percent last week; the highest since March. 

The rise in the inflation expectations can be attributed to the rising price of oil, Goldman Sachs’ co-Head of Global Macro Markets Research, Francesco Garzarelli, told CNBC last week.

Still, the difference (between the 10s and 2s) continues to drop, i.e. the curve continues to flatten despite the rise in the long-term inflation expectations. It is because investors likely believe the Fed would look through the oil-led rise in inflation expectations.