US inflation expectations jump to nine-year high, more fuel for Treasury yields

US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data jumped to the highest levels last seen during 2012 by the end of Thursday’s North American trading.

In doing so, the risk barometer extends recovery moves from late September while flashing 2.64% at the latest.

The same favors US Treasury yields that recently track reflation fears to rally, the 10-year coupon pokes a five-month high around 1.70% at the latest. This phenomenon underpins the US dollar’s safe-haven demand amid Fed tapering chatters.

It’s worth noting that the US dollar witnessed a rally in the past when the US 10-year Treasury yields crossed the 1.70% mark.

On Thursday, Federal Reserve Governor Christopher Waller said that the next few months will be critical to see whether inflation is transitory, as reported by Reuters. Before that, Federal Reserve Governor Randal Quarles and Cleveland Fed President Loretta Mester highlighted inflation fears.

It should be noted, however, be observed that the 2.64% level of the stated inflation gauge is the tough resistance and hence a cautious view is needed for a sustained break of the 2.64% level for the US dollar bulls, which in turn could weigh on gold prices.

Read: Gold Price Forecast: XAU/USD steady around $1,780.00 capped by high US T-bond yields