U.S. inflation expectations hit 8-year high

    Rounds of massive easing stimulus have boosted oil and metals prices. The economic indicators pointing to a strong recovery from the pandemic and a bond market gauge of U.S. inflation expectations soaring to its highest level in eight years. The 10-year inflation rate climbed to 2.4% on Tuesday, the record high since April 2013. Meanwhile, U.S. Treasury yields rose across the board, with the benchmark 10-year yield climbing as much as 6 bp to 1.63%.

    Reports show soaring home prices and consumer confidence, as well as new vaccinations. guidelines that allow people to stay outdoors without mask. Market activity appeared to reflect a broader reflation recovery. Markets are expecting the Fed to acknowledge an improvement in the economy, and investors will be watching for signs of when the Fed may begin tapering its bond purchases. But the challenge for the Fed is how to prepare the market for a tapering without triggering a "taper tantrum."

    Subadra Rajappa, head of U.S. rates strategy at Societe Generale, expects the Fed to give the market some hint ahead of time if it considers tapering its bond purchases by the end of the year. He expects that the Fed may announce a reduction in quantitative easing in June this year.