Citigroup Rates Desk Says Market Is Too Calm About US Inflation

Alice Atkins

Thu, February 12, 2026 at 9:02 PM GMT+9 1 min read

Bloomberg

(Bloomberg) – Markets are complacent on the outlook for US inflation, making trades that pay out if price pressures climb look attractive, according to the rates desk at Citigroup Inc.

Investors may be underestimating the resilience of the US consumer and market expectations for inflation are likely to be revised slightly higher, said Benjamin Wiltshire, a rates trading desk strategist at the US bank.

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“Markets seem to have this conviction that inflation is going to come down,” Wiltshire said in an interview. “We’re still in a structurally higher inflation environment.”

Wiltshire recommends buying five-year five-year inflation forwards, which he reckons look too low at around 2.5%. Current inflation is still running hotter than that — the Federal Reserve’s preferred measure of underlying inflation remains sticky at just under 3%.

The comments follow strong US employment figures on Wednesday that caught investors off guard, sending Treasury yields surging as traders lowered expectations for Fed interest-rate cuts this year.

US bonds stabilized on Thursday, with 10-year yields one basis point lower at 4.17%. Traders will next be focusing on initial jobless claims data later in the day for a gauge of the economy, ahead of January consumer-price inflation figures due on Friday.

Wiltshire said the market is reluctant to price more inflation risk, given many were disappointed by the lack of rapid pass through from US tariff policies last year.

“The vigor to go and price inflation premium is not there,” he said. “I think structurally it’s underpriced.”

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