SPIP - TIPS And Drying Paint

2024-02-13 22:57:00 ET

Summary

• One of the issues of an interest rate focussed blog is that bond markets can settle into rather uneventful extended range trading dynamics.
• The 10-year breakeven (top panel) has settled into a trading range after a certain amount of excitement around the pandemic.
• Modern economies have a lot more inflation inertia than they did during the peak of the welfare state and Old Keynesian business cycle management.

One of the issues of an interest rate focussed blog is that bond markets can settle into rather uneventful extended range trading dynamics. This has been the case for U.S. inflation-linked bonds, at least from a strategic perspective. That is, given a target fixed income allocation (which depends upon preferences and situation of the investors involved), should we hold inflation-linked or conventional government bonds?...

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