Near-Term Risks Have Risen For Breakevens: Deutsche Bank

Thanks to the renewed focus on Fed tightening and associated upside risks for the USD and downside risks for the Chinese economy, commodities and risk markets, near-term risks have risen for B/Es, believe DB analysts. Markus Heider and Alex Li point out in their May 20 research piece titled “DB Inflation Report-Weekly Inflation Update” that breakevens have struggled since the Fed jawboned rate expectations higher in the April FOMC minutes last week.

Breakevens: mixed performance last week

The DB analysts point out that aided by the sell-off in nominals, above all, driven by a repricing of Fed policy expectations pushing up real rates, last week witnessed a mixed performance on the breakeven front. Heider and Li note that with the U.S. April CPI...