Dear Readers,

An unfortunate quantitative mistake was introduced in the inflation adjustment estimates of the “Inflation and the Curve” article published in late September. Actually, the article’s opinion and theme were consistent despite the error that only covered the quick-and-dirty quantitative analysis of a recent 3-year note auction. But of course quantum matters in finance so my most sincere apologies for the error.

The article is now updated and you can now access the updated version here: Inflation And The Curve: The Sharp Edge of The Front End.

This blog does attempt to provide insights into financial markets however, given the limited ressource available to me, some articles will be published with a bit of haste. My recommendation to any reader: for this blog, just as with any other source of financial information, always double-check results for yourself.

The initial mistake was quite unfortunate as the article actually did correctly highlight the negative yield that was then priced in over 3-year T-Notes once inflation was taken into account (auction YTM was underpriced given current inflation expectations producing a real negative yield). As it turns out, the recent 5-year TIPS auction, priced with a negative yield, seems to confirm this in the market, at least for now.

Again, as mentioned in the past article: inflation isn’t something we should immediately reject. After all, higher profits, higher wages, higher production are all good things too. Runaway inflation can be an issue but we’re not there just yet.

That being said, inflation, just as any other measure in the economy, is something that requires constant monitoring, which brings me back to that “front-end of the curve”.

Comments are closed.

Disclaimer: Material posted on 24-something does not contain (and should not be construed as containing) personal financial or investment advice or other recommendations. The information provided does not take into account your particular investment objectives, financial situation or investment needs. You should assess whether the information provided is appropriate to your particular investment objectives, financial situation and investment needs. You should do this before making an investment decision based on the material above. You can either make this assessment yourself or seek the assistance of an independent financial advisor. 24-Something, associated parties and Tariq Scherer accept no responsibility for any use that may be made of these comments and for any consequences that result.