Bessent's bond gambit aimed at calming markets is instead stirring inflation worries

Investors over the past several days have priced in a likelihood of higher inflation ahead, a potential sign that the Treasury Department's efforts this week to improve liquidity in the government debt market are raising concerns over broader policy implications.

The so-called breakeven rate, a market-based measure that compares Treasury yields to inflation-protected securities of the same maturity, rose across the curve, hitting its highest level in more than two months. Breakevens reflect inflation expectations as well as compensation investors seek for inflation risk and other factors.

At the 10-year horizon, the breakeven rate rose to 2.34% on Thursday, its highest since June 10. Five-year breakevens hit the same level, the highest since June 16. While the measures can be volatile and still imply the market doesn't expect runaway inflation, they also indicate that inflation worries are rising.