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Breakevens echo US government's deflation fears
Despite concerns that economic stimulus efforts in the US could pump up the country's money supply, the bond market, like the Treasury's Federal Open Markets Committee (FOMC), still regards deflation as the main concern in the short term.
Implied inflation rates, derived from the prices of Treasury inflation-protected securities (Tips), have risen recently but are still low by historical standards: the one-year implied rate is -1.16%, down from a recent high on March 19 of -0.05%. The two-year rate has risen to -0.19% and the five-year rate has reached 0.94%, having been above zero since January 28.
In a statement released on April 30, the FOMC said: "In light of increasing economic slack here and abroad, the Committee expects
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