(Bloomberg) -- Bond traders have slashed their inflation expectations, putting the so-called breakeven rate for Treasuries linked to consumer-price gains over the next five years on track for its biggest one-week drop since the early months of the Covid pandemic.

Concern about the newly emergent omicron variant has combined with a hawkish pivot from U.S. central bank boss Jerome Powell to tamp down inflation fears, although the expected rate of gains still remains substantially above the Federal Reserve’s target of about 2%. A drop in oil prices Thursday could also add downward pressure to the inflation outlook.

The five-year Treasury breakeven rate was around 2.71% in New York trading Thursday, down from 2.95% at the end of last week and a peak of more than 3.25% earlier this month. 

The move so-far this week is similar in scale to one that happened in mid-April 2020, although it’s less than half the size of a drop from mid-March 2020 when the onset of Covid concerns sent markets reeling.

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