By subtracting the yield of TIPS (Treasury Inflation Protected Securities) of a particular maturity from the yield of an ordinary Treasury note/bond of the same maturity, you obtain the implied annualized inflation over the time to maturity.
TIPS yield Curve (%)
Source: www.treasury.gov
As seen above the market is indicating a deflationary picture over the next five years. As of 5th January this expectation was over a 7 year period. How this expectation changes over 2009 will be interesting to monitor.
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