US inflation expectations too low, Citigroup says

Citigroup’s rates desk believes that markets are underestimating future US inflation, making inflation-linked trades appealing. Strategist Benjamin Wiltshire suggests that investors are not fully acknowledging American consumer resilience, implying that market expectations for inflation will likely need upward revision. He recommends purchasing five-year five-year inflation forwards, which he considers undervalued at approximately 2.5%, below the Federal Reserve’s preferred measure of underlying inflation.