SPIP - Inflation The Unwelcome House Guest: Here To Stay Or Just Passing Through

• Central bank policy makers appear to have a higher tolerance for inflation than in previous cycles, even more so because of QE.
• It is worth adding a note of caution when looking at breakevens. There is a massive mismatch between the supply of inflation linked bonds and the demand for them.
• If central banks decide to unwind QE by selling their long-dated government bonds (rather than letting them mature) as a policy tool to fight inflation, then this sector would be a rather unappealing area to be positioned in.

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