Are current inflation breakeven rates too cheap?

Breakeven inflation rates are in many cases trading at levels not seen since before the financial crisis.

For inflation-linked bond investors, the past two years have been difficult. Nominal bond yields have collapsed in the wake of a rapidly falling oil price in the second half of 2014, leading to outsized returns for long-dated investors. However, the majority of the fall in yields has occurred from sharply lower breakeven inflation rates (future inflation expectations) rather than reduced real yields, which are trading at similar levels today as they were in late 2013. As a result, breakeven inflation rates are in many cases trading at levels not seen since the deflation scare of 2002 ...