Yesterday about $20 billion in ten year TIPS notes were sold. TIPS are debt that adjusts the principal returned based on inflation. So the interest rate is lower, but the amount you get repaid at the end of ten years is higher, based on inflation over the period. The rate at which TIPS debt is sold gives you some indication of inflation expectations, because it reflects the risk people perceive they are taking, since they have to go ten years with a lower interest payment and lower income. This rate was 2.24% compared to 2.07% in September. This is a pretty clear indication that debt investors expect inflation to remain elevated.
