The last few months have seen short-term (5Y) inflation expectations in the breakevens market surge to their highest in 5 years; and while longer-dated inflation expectations have also risen, they have not kept pace with the short-end. A similar move was last seen in Q1/2 2008.

Simply put, markets are expecting an inflationary impulse in the short-term, but do not expect it to last as it will likely be swamped out by a recession as the economy is not grown fast enough to justify prices rising at that pace, and instead either profit margins will collapse or end demand shrivels as companies fail to pass through rising costs.

And, as a result, for the first time since July 2008, the inflation breakevens yield curve has inverted, with the market's expectations for 30Y inflation now below that just 5 years ahead.