The bond market was flashing signs of worries about the U.S. economic outlook, as expressed through falling expectations for future inflation.
The 5-year breakeven rate, a gauge of expectations for the average annual inflation rate five years out, was down 4 basis points at around 2.29%, according to FactSet. It had been as high as 2.5% on Aug. 27.
Fears of tariff-driven inflation have now given way to a range of other issues that include a deteriorating U.S. labor market, a partial government shutdown, trade tensions with China and concerns about banks’ exposure to bad loans. A weakening economy is seen as likely to take the edge off future inflation.
