With the recent rise in commodity prices, market expectations for US inflation over the next five years rose to their highest level in 15 years on Thursday.

Yields on some US treasury bonds hit multi-month highs this week, while demand for inflation-preserving bonds kept yields relatively stable. The difference between the two represents the level of inflation required for the two to return equally.

The yield on 5-year treasury bonds hit 1.192% on Wednesday, the highest level since March 2020. The yield on 5-year inflation-preserved bonds is about -1.70%.

The difference between the two reached 2.86 percentage points on Thursday, the highest level since 2005. The 10-year and 30-year break-even inflation rate also reached a multi-year high this week.

“Although there is plenty of evidence that the current inflationary pressure is temporary, we do expect the average level of inflation next year to be higher than the level of the past ten years,” said Peter Chatwell, head of multi-asset strategy at Mizuho International. “It's a paradigm shift.”

Oil prices fell on Thursday but are still close to a seven-year high.