The long-term five-year inflation expectations have risen in the United States, following plausible effects of Trumplation. Markets seem to have bought into the story that Trump will boost growth through infrastructure spending and tax cuts, which have led to higher inflation expectations, higher US yields and a re-pricing of Fed hikes.
Ten-year US treasuries are now trading at 2.2 percent, the highest level since year-end 2015 and the US 5Y5Y inflation expectation has risen to 2.4 percent, Danske Bank reported.
Markets have more or less fully priced in a Fed hike in December and more than two hikes from now until year-end 2017, before the election, markets priced in only one and a half Fed hikes.
Meanwhile, a pronounced rise in yields has been observed both in Europe and in the US and amid a clear steepening of the curve 2Y10Y and 5Y10Y. However, it is important to underline that the tendency towards steeper curves and higher yields started before the US election.


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