Recovery on Track

02.12.21

Chart of the Week – Recovery on Track

The U.S. 10-year breakeven rate, the difference between the yield on the benchmark U.S. Treasury note and its inflation-protected counterpart, has recently touched levels not seen since 2014.

Unprecedented fiscal and monetary stimulus is the prominent force driving our economic recovery. Expectations for future growth and inflation are rising as well. We believe the steepening in the U.S. Treasury curve will continue through 2021 with the 2- and 10-year yield spread rising at least 35 basis points. In our view, these conditions serve as a tailwind for the most cyclical sectors of our economy, including commodities, financials, value and small size.

Support for Reflation Trade

Source: Bloomberg, Ivy Investments. Dates shown are January 1, 2020 through February 8, 2021. This chart is being provided as a general source of information for education purposes only, and is not intended as a recommendation to purchase, sell or hold any specific security or to engage in any investment strategy.