US Treasury yield movements betray deflation danger

Inflation often accompanies the end of the recovery after a crisis, but while US companies may fear high inflation, banks and investors increasingly see deflation as the more serious risk to the US economy.

On July 1, RBC Capital Markets published the results of a survey of 440 senior executives from major non-financial companies around the world. One question was whether inflation or deflation posed a greater risk to their organisation’s financing decisions and capital budgeting process over the next 12 to 18 months. Sixty-one percent of those surveyed said that an assumption of inflation formed part of their strategy, while just 21% pointed to deflation. Among those polled in the US, almost 64%