Morning Notes — Inflation Breakeven Yields

The potential catalyst for a Fed pivot in today’s world would likely start in declining inflation expectations. This puts the focus on 10-year inflation breakeven yields, which broke 280bps last week, staring a broadening top pattern.  The break below 280bps has already seen market expectations for the terminal rate drop from ~3.50% to levels below 3%.  A further decline in breakeven yields that take the expected terminal rate to levels closer to 2.50% will be our signal for an ultimate Fed pivot.