Market-based inflation expectations rise to two-month highs after Treasury doubles debt buyback size to $2 billion.
Investors are pricing in higher inflation expectations following the Treasury Department’s decision to double its debt buyback operations to $2 billion. The 10-year breakeven rate, a gauge of inflation expectations, climbed to 2.34% on Thursday, its highest since June 10, while five-year breakevens matched levels last seen in mid-June.
The move comes as part of a routine liquidity operation launched in 2024, but it follows a surge in long-term Treasury yields to levels unseen since before the 2008 financial crisis. Treasury Secretary Scott Bessent denied the buybacks were aimed at suppressing yields, though market participants remain wary of broader policy implications.
While breakevens remain volatile and do not signal runaway inflation, the rise reflects growing investor concerns about inflation risks amid an already uncertain macroeconomic backdrop.