Treasury Traders Are Betting Omicron Will Add to Inflation Spike

• Treasury traders are betting the rapid spread of the omicron variant will increase inflationary pressures in the U.S. economy, rather than weaken them. 
• U.S. 10-year break-even rates which are market estimates for the average rate of inflation over the next decade climbed to as high as 2.66% on Tuesday, the most since November, and up from as low as 2.36% on December 14. The extra yield on Treasury 10-year notes over two-year securities has also jumped this week, indicating the bias may be switching back to a steeper yield curve. 
• The move came after Treasuries posted their worst start to the year since 2009 sending ripples through markets from Australia to the U.K. amid growing expectations that the Federal Reserve will start to raise its policy rate as soon as May, earlier than the July liftoff projected a month ago.

(Source: Bloomberg)