Inflation may be peaking, or at least that is what Treasury bulls are thinking. A rally started at the 20-year note and worked its way to shorter term rates this week: the 30-year yield fell 13 basis points and the ten-year yield fell by 12 basis points. Declining yields were driven by investors flooding into these treasury markets. Still, investors are pricing in a half-point rate increase by the Fed in the next two meetings with an almost 100% chance of reading the tea leaves in the options markets. The rally was really suppressed by Bank of America’s Forecast which said inflation peaked in March and will be on the decline. Similar patterns took place on the long end of the government bond market in the Euro areas as well with Germany and the U.K. seeing their yields fall.

Finsum: The flood in the TIPS market suggests that bond investors still see some persistent inflation in the near term.