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How the Fed Reads Falling Breakeven Rates
Season 2
Episode 57
Published 3 weeks, 3 days ago
Description
With the S&P 500 rallying to 7,511 and the Dow at 52,000, you'd expect inflation expectations to be rising. But the 10-year breakeven inflation rate has actually ticked down to 2.29 percent. Lucas and Luna unpack what the Federal Reserve makes of this disconnect — whether falling breakevens signal a darkening growth outlook beneath the equity rally, and why the Fed might care more about this metric than the latest CPI print. They discuss the mechanics of TIPS versus nominal Treasuries, compare the current 2.29 percent reading to the pre-pandemic normal, and explore how geopolitical risks like the Iran situation shape the bond market's inflation calculus. A tight episode on the one number that has the Fed's attention this week.