The bond market is ‘moving on’ from the Iran war
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The bond market is showing signs of moving on from the Iran war, with the Treasury breakeven inflation curve indicating that investors believe the Federal Reserve will keep inflation restrained. The curve has reversed its previous inversion, suggesting that the market is now less concerned about the impact of the war on inflation.
Wall Street traders are watching the Treasury breakeven inflation curve, which shows the market's expectation of average inflation over two periods. The curve has been under scrutiny after the Iran war, but has since reversed its inversion. The gap between the 10- and 2-year breakeven rate is now at negative 0.5408 percentage points, higher than its low point on March 20. This suggests that the market assumes lower annual average inflation over the short term. The 2-year breakeven inflation rate has decreased to 2.9369%, while the 10-year rate has stayed around 2.34%. Investors believe the Federal Reserve will ultimately keep inflation restrained, despite the war and inflation remaining above the Fed's target.
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