A closely watched bond market indicator is pointing to rising price pressures in the US, in anticipation of policies from president-elect Donald Trump that are seen as likely to fuel inflation. So-called break-evens on US sovereign debt — a proxy for investors’ inflation expectations — have risen steadily in recent weeks, prompted by economic data pointing to stickier than expected price pressures and Trump’s rising electoral chances.
However, other investors have questioned whether market expectations of inflation have been overdone, if Trump’s campaign rhetoric on tariffs and taxes is not matched by his actions in office. Federal Reserve chair Jay Powell indicated on Thursday that he was not yet concerned about the shift in inflation expectations, saying they were broadly consistent with its 2 per cent inflation target.