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Data: FRED; Chart: Axios Visuals

The bond market just sent the strongest signals yet that investors believe inflation will ultimately be transitory.

What’s new: Key bond market yields like the 10-year Treasury hit new lows this week.

Why it matters: Yields have come down because investors are cycling out of the inflation trade.

  • "The market had not necessarily agreed with Powell’s forecast that inflation would be transitory. But now it’s coming around to that view," Grant Moyer, head of leveraged finance at MUFG Securities, tells Axios.

Details: The 10-year Treasury went as low as 1.25% on Thursday.

  • That’s a decline of more than 30 basis points since the June 16 Federal Reserve meeting — a sizable move in the world of Treasuries.

Meanwhile, ICE BofA's high yield bond index just dipped below 4% — for the first time.

Be smart: In an inflation trade, investors position themselves to benefit from an environment of rising prices. That means buying assets that will appreciate, like commodities, gold, real estate or even stocks.

  • Low-yielding fixed income is unattractive if you're preparing for lengthy inflation. But that’s one area investors are buying into now — piling into bonds and pushing down the yields.

What to watch: Inflation is still expected to remain somewhat elevated this year — to the tune of 3.4%, according to the Fed's latest estimates.

  • But some of the key inflation metrics are leveling off, rather than continuing to move higher — which could support the Fed's view that next year's inflation will come back down to around 2.1%.

Go deeper

Oct 15, 2021 - Podcasts

The bad and the good in the latest inflation data

The global energy crisis is causing a whole series of economic headaches, not the least of which is inflation. The Consumer Price Index, the best American measure of inflation, jumped 5.4% in September, compared to last year. That's according to new data out this week.

  • Plus, the fallout of bigotry in the NFL.
  • And, celebrating Latino ingenuity to close Hispanic Heritage Month.

Guests: Axios' Felix Salmon and Kendall Baker, and Telemundo's Marina Franco.

Credits: Axios Today is produced in partnership with Pushkin Industries. The team includes Niala Boodhoo, Sara Kehaulani Goo, Dan Bobkoff, Alexandra Botti, Nuria Marquez Martinez, Sabeena Singhani, Alex Sugiura, Lydia McMullen-Laird, Michael Hanf, and David Toledo. Music is composed by Evan Viola. You can reach us at podcasts@axios.com. You can text questions, comments and story ideas to Niala as a text or voice memo to 202-918-4893.

Go deeper:

Kate Marino, author of Markets
Oct 15, 2021 - Economy & Business

This is what a profit margin squeeze looks like

Expand chart
Data: U.S. Bureau of Labor Statistics; Chart: Jared Whalen/Axios

Two inflation indexes out this week, taken together, show how companies’ margins are getting squeezed.

Why it matters: Corporate earnings growth, while still historically high, is receding from record second-quarter levels. Margins will be a huge focus during Q3 earnings calls this month.

Next big bet: Wagers rush in on Fed chair pick

Illustration: Aïda Amer/Axios

There are those speculating whether Fed chair Jerome Powell gets another term. Then there are those speculating with real money on the line.

Why it matters: The explosion in retail trading is one sign of the flush consumer's betting fervor. The amped up rush to wager on political outcomes — like who's next to lead the Fed — is another.