Long-term U.S. inflation expectations measured by 5y5y swaps rise toward European levels, supporting the dollar and Treasuries.
U.S. long-term inflation expectations, tracked via 5y5y inflation swaps, are closing the gap with Europe as markets price sustained disruption risks. The shift reflects growing concerns over persistent inflationary pressures in the U.S. relative to prior expectations.
Earlier this year, European inflation swaps traded at a premium to U.S. levels, but recent moves suggest convergence of up to 10 basis points. Analysts point to resilient domestic demand and supply chain constraints as key drivers behind the repricing.
The adjustment has provided support for the USD and U.S. Treasuries, as investors adjust portfolios to reflect higher inflation expectations over the medium term.