US Stagflation Risk Dashboard as of 30 Aug 2025

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 Scenario Probabilities

*My heartfelt thanks to EODHD.com for helping me with financial markets historical data. A truly innovative data source company.  They have data on Equities, Indices, ETFs, Forex, Crypto and cover more than 60 Exchanges worldwide. Check them out.     


EXECUTIVE SUMMARY

For background reading on model, inputs and methodology please read https://ngtiankhean.blogspot.com/2025/08/usa-stagflation-risk-dashboard-11-aug.html 

  • Main takeaway for this week: The picture is mixed, very noisy, contradictory and confusing. 
  • All scenarios almost equally likely
  • Stay away. Wait till a a clearer picture merges. 

What changed since last week

• Inflation compensation: 10Y breakeven 0.0 bps to 2.41 (%), 5Y -2.0 bps to 2.47 (%).

• Real rates: 10Y TIPS 0.0 bps to 1.81 (%), 5Y TIPS +1.0 bps to 1.2 (%).

• Curve: 2s10s changed -5.0 bps to 0.6 (% points).

• Credit risk: HY OAS -3.0 bps to 2.75 (%).

• CPI: No new monthly print since the prior report; CPI panel unchanged week over week by design.

Implications

• Breakevens vs real yields: Use the relative direction to gauge inflation-first vs growth risks; firmer breakevens with easier real yields biases toward inflation-first if persistent.

• Curve dynamics: A long-end led steepening alongside sticky breakevens flags stagflation risk; flattening with weaker data tilts toward recession-first.

• HY OAS tightened WoW. A continued decline eases financial conditions and supports soft-landing probabilities.

• Payroll pulses: Rising wages with slowing hires and elevated claims-stress favor inflation-first or simultaneous-shock; softening wages with resilient hiring supports soft-landing.

• Risk management: Favor inflation hedges when breakevens trend up and real rates down; rotate defensive on curve flattening with wider spreads; add duration if recession-first rises with falling real yields and wider credit.

5y5y Breakevens

5y5y breakevens: latest level and WoW change noted in Executive Summary.

2s-10s Treasury Yield Spread

2s-10s Treasury spread: positive is steepening; WoW in Executive Summary.

CPI YoY



 CPI YoY: panel unchanged WoW unless a new monthly print.

High-Yield OAS

HY OAS: declined WoW, easing financial conditions and supporting soft-landing odds if sustained.

TIPS Real Yields

TIPS real yields 5y/10y: WoW discussed in Executive Summary.

Payrolls Module










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