Japan pulled out the firepower this week in terms of qualitative easing. Speculation is running the Fed will announce same at the beginning of November.
And so people are worried. That all this money creation means things are going to start getting expensive, really quickly.
Here's how frightened they are.
In the past week, yields on U.S. inflation-protected Treasury securities have fallen off a cliff. Meaning investors are piling into these investments for protection against global money printing.
So much so, the yield on the seven-year inflation protected security has fallen to a near-ridiculous 0.04% this week.
This is astounding. Investors locking up their money for 7 years are rewarded with less yield than on a typical savings account.
Of course, this is a bet on the future. Investors believe inflation will pick up, raising interest rates on the inflation-protected securities and ultimately increasingly yield.
But it's incredible the sacrifice such buyers are willing to make in terms of short-term yield in order to "buy insurance" against inflation. For comparison, yields on regular (non-inflation protected) Treasury bonds are running 1.75%!
This has played out across the inflation-protected curve. Yields on the 10-year inflation-protected security have fallen from 1.3% to 0.5% over the last three months.
The 30-year has dropped from 1.9% to 1.4%.
The inflation boogeyman is back. And scarier than ever apparently.
By. Dave Forest of Notela Resources