The “structural shift” discussion as it relates to long run rates in a new macro regime is starting to find its way into weeklies and also into the day-to-day market banter.

Despite being important, this won’t likely become a general interest topic until the Fed formally acknowledges it, where that means it becomes a mainstay of public speaking engagements or it gets enshrined in the SEP.

For those who need a primer, I’d again refer you to “Finding The North Star In Oz,” although I’ve published several follow ups, including a short piece last week with some thoughts on the subject from Nomura’s Charlie McElligott.

The broader long run neutral debate is bound up with the dynamics driving the inflation uncertainty discussion, as recounted at some length in “Forever Inflation.”

Underscoring that, JPMorgan’s Nikolaos Panigirtzoglou pointed to the chart on the left below, which overlays i) term premium estimates from the Q1 2023 Philly Fed survey and the December 2022 Blue Chip survey of the average short-term rate expected over the next 10 years, with ii) the NY Fed’s ACM model.

“There is a notable increase in the survey-based term premia estimates to the most positive territory for at least 15 years,” Panigirtzoglou remarked, adding that investors demanding “significantly higher term premia… suggests they are less willing to look through still-elevated inflation volatility and uncertainty.”

Although the bank’s measure of inflation volatility has subsided, it still sits “at rather high levels,” as Panigirtzoglou put it.

Meanwhile, Goldman’s Praveen Korapaty pointed to the bear steepening in the curve that followed last week’s blockbuster January retail sales print, and continued Thursday, when US PPI data came in hot.

“Unlike the curve flattening seen post-CPI, the bear steepening that followed the stronger-than-expected January retail sales was consistent with our assessment that activity data will be key to eroding the market’s low r-star assessment,” he said.

Those of you following along last week will recall that the steepening episode Korapaty referenced manifested as a dramatic reversal. “The notable inflection within Wednesday’s price action was that the selloff was steepening in nature as the sharp reversal from -92bps in 2s10s reached -80bps in an impressive 12bps round trip in the wake of the retail sales report,” BMO’s Ben Jeffery and Ian Lyngen recounted.

You can debate what prompted the following session’s extension of the steepener, but the PPI figures were a contributor. Nomura remarked on a “sudden burst” of right-hand vol outperformance Thursday, suggesting that might’ve been indicative of “the larger structural story that r-star is likely higher than previously realized [as] the Fed continues to look behind the curve into a potentially ‘structurally’ different US economic and labor force dynamic versus the old ‘slow-flation’ regime of the prior 10+ years.”

And yet, coming full circle, this remains an underappreciated story — even by markets. “The market has revised higher 2023 inflation pricing by 45bps so far this month,” Goldman’s Korapaty went on to say, before quickly calling attention to apparent apathy looking further down the road. “Notably this has not translated to any material move higher in more distant inflation forwards [as] 5y5y swaps are up just 6bps on the month and remain within the recent range.”