Indications of inflation are slipping away as the Fed nears the end of the taper
“In the next few meetings, we could take a step down in our pace of purchase,” Bernanke said in a question-and-answer session with the Joint Economic Committee….on May 22, 2013.
On the charts below, May 22, 2013 is circled. Just comparing the level on that day with current levels, as tapering nears its end. The ten year yield is indeed higher at 2.48% vs 2.04 when tapering was first hinted. However, inflation indicators are all lower. Red/gold pack spread was 182, now 176. The German bund yield has collapsed…UST vs Bund has gone from 61 to 152. Gold from 1370 to 1217. Copper from 334 to 305. CRB from 288 to 282 and Ten year treasury to the inflation index note from 230 bps to 195…right at the low from June 2013. Not pictured, but EEM etf was 42.96, now 41.61. I guess the point is that one of the Fed’s goals is to engender inflation to make the debt load a bit easier to bear. As we near the end of tapering and a possible hike in short term rates, inflation indicators are faltering.
These are levels from May 22, 2013 and today
Ten yr yield 204 Current 248
Red/gold pack spread 182 Current 176
US ten yr/bund spd 61 Current 152
Gold 1370 Current 1217
Copper 334 Current 305
CRB 288 Current 282
Ten yr treasury/tip spd 230 Current 195
Dollar Index 84,35 Current 85.60
