The US bond market's inflation expectations for the next five years soared to the highest level since 2006 on Monday.

The 5-year break-even inflation rate, which reflects the difference in yield between inflation-protected bonds and ordinary bonds, rose as high as 3.4 basis points to 2.7327%. Nominal bond yields were relatively stable, with 5-year yields falling about 1 basis point to 0.76%.

At a time when the break-even inflation rate soared, a cyber attack caused the closure of key US oil pipelines, oil prices soared, and gasoline futures rose to a high of nearly three years. On the other hand, due to improved economic prospects and Biden's infrastructure and epidemic relief plans, market inflation expectations have already remained high.

However, the relative calm in nominal yields suggests that some investors are still hesitant about whether inflation expectations will be met and how long the economic momentum will last. The futures market still expects the Fed to raise interest rates in the first quarter of 2023, the same as last week.

Brown Advisory's portfolio manager Thomas Graff said, “The focus of the market is on whether the structural factors that have contained inflation over the past few decades will be released and overwhelm strong economic momentum.”

The break-even ratio was boosted by weaker-than-expected US employment data last Friday. Some market watchers speculate that labor market conditions may spur wage levels to rise.