Chart of the Month

August 2020

Data source: Eikon Reuters

Gold and silver prices have risen sharply as US real yields have dived further into negative territory, but the 2012-13 experience warns that the relationship is not straightforward. An additional source of optimism for precious metals today is the scope for a spike in US inflation.

July 2020

Data source: Eikon Reuters

While the price of the 5Y5Y inflation swap has been falling in the past two years to 1.8%, on the back of a collapse in oil prices,  Michigan consumer surveys reflect an expectation of a higher inflation rate (2.9%). This arises from the fact that the 5Y5Y is used as a trading instrument and is very sensitive to the change in oil prices. There is no reason why long term measures of inflation expectations should be sensitive to current oil shocks, given the capacity for subsequent monetary policy adjustments.


June 2020

Data source: Eikon Reuters, SIFMA, EP 

For the first time in 20 years, the 12-month rolling sum of the Fed’s purchases of US Treasuries has outpaced the annual net issuance from the US Treasury (excluding T-Bills). Typically, benchmark bond yields fall in anticipation of Fed asset purchases and rise when the gap between the annual pace of Fed purchases and the 12-month sum in Treasury's net issuance closes.

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