Monday, September 15, 2025

Latest

Disparity Between US CPI and 10Y Highest Since 1980

The latest CPI print has done little to settle the debate between team “transitory” and team “persistent” inflation— if anything, it has only intensified the two polarizing viewpoints. Indeed, as Deutsche Bank’s Jim Reid puts it, “even though US CPI smashed expectations again, the data isn’t going to change anyone’s mind of whether inflation is transitory or not.”

Putting the debate aside, however, Reid finds an even more interesting signal that might be of interest to investors. The current divergence between the US CPI and the 10-year Treasury yield has surged to 3.5%— the widest since 1980. Even more interesting, though, is the fact that the gap has only ever been negative for 10 months in the past 70 years, being in 1974, 1975, and 1980.

Such a deeply negative (albeit crude) proxy for real yields is great for financial conditions today,” explained Reid. however, he asks, “are we building up to a big accident with such a mismatch between inflation and bond yields?

Coincidentally, it is interesting to note that the Federal Reserve has not mentioned how high it anticipates inflation will actually reach as the economy continues to reopen. Just like the rest of us, officials are probably surprised by the latest April and May print, albeit they will likely continue to peddle the “transitory” narrative come next’s policy meeting.

Indeed, as inflation continues to inch higher, inflation expectations and wage demands will correspondingly rise as well. Already, employers are struggling to fill vacant positions as workers demand higher wages amid a booming demand for goods and services. This means that the pre-pandemic labour force participation rate may have to increase even further than previously anticipated in order to mitigate secondary effects.

In the meantime, the Fed will presumably refrain from quantifying its inflation expectations until all unemployment benefits are phased out and schools fully reopen. Investors are now stuck waiting until September’s data for clarification on whether the current labour shortage is due to generous unemployment benefits (which are slated to expire then), or if other, not-so-transitory factors are at play.

In short, the gap between the CPI run rate and the 10-year yield brings attention to the idea that investors may end up startled if inflation does not end up being so transitory, regardless of what the Fed claims.


Information for this briefing was found via Barron’s. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

Video Articles

New Found Gold: The Strategic Maritime Resources Purchase

Amex Exploration: Revised Perron PEA Has INSANE Economics

Aris Mining: The Multi Billion Dollar Soto Norte PFS

Recommended

Northern Superior Expands Philibert With 350 Metre Step Out Testing 1.10 g/t Gold Over 25.5 Metres

Goliath Resources Hits 18.58 g/t Gold Over 5.00 Metres At Surebet

Related News

Canadian Inflation Slows to 6.3% in December

Consumer prices continued to slowly moderate in December, suggesting peak inflation may have passed. Canadians...

Tuesday, January 17, 2023, 08:48:52 AM

Larry Summers: Policy Decisions Have Put the US Economy on a ‘Problematic Course’

Despite the Fed’s repeated efforts to brush aside growing inflation concerns even as Americans across...

Friday, July 2, 2021, 02:46:00 PM

Scorching Hot CPI Soars at Fastest Pace in Nearly 40 Years Again While Wages Continue to Plummet

Are you tired of forever-skyrocketing CPI prints? We are too— but here we are again,...

Wednesday, January 12, 2022, 02:43:00 PM

Jack Dorsey Sounds Alarm Over Hyperinflation After Twitter ‘Mistakenly’ Censors GOP Lawmaker’s Post About… Inflation

Jack Dorsey may have to flag his own tweet as “sensitive content,” after the Twitter...

Tuesday, October 26, 2021, 10:08:00 AM

Canada Experiences Slower Pace of Price Growth as CPI Increases by 0.1% in July

It appears that prices in Canada have grown at a relatively low pace amid the...

Thursday, August 20, 2020, 04:06:00 PM