(Bloomberg) — Barclays Plc and HSBC Holdings Plc say concern the Federal Reserve is dragging its feet on inflation is giving investors another reason to buy bonds that offer protection from accelerating price growth. <\/p>\n
Most Read from Bloomberg <\/p>\n
Long-maturity US yields hit their highest in almost two decades last week as Fed Chairman Kevin Warsh’s refusal to say how policy makers will control inflation fueled worries the central bank may act too late \u2014 even though he’s been adamant about keeping a lid on price growth. <\/p>\n
That came on top of wild swings in oil markets and concerns about government spending. At the same time, breakeven rates, which measure inflation expectations, are close to their lowest in a year. <\/p>\n
“I’d expect the market to price greater inflation risk into the curve, following what’s been interpreted by the market as a ‘dovish hold’ with questionable credibility,” Jon Hill, head of US inflation market strategy at Barclays. “That would mean wider breakevens, and inflation-linked bonds outperforming conventional ones.” <\/p>\n
After the Fed meeting, HSBC’s Dhiraj Narula reiterated a recommendation on long-maturity US bonds that protect against price growth, citing concern about the US central bank’s “longer-run commitment to inflation control.” <\/p>\n
Bond Investors Revive Old Trade as Inflation Shapes Outlook <\/p>\n
While a Bloomberg gauge tracking inflation-linked debt is up 0.3% this year that’s still a better showing than the 0.7% loss for an index of conventional sovereigns in the period. <\/p>\n
Inflation-linked bonds shield investors by paying a yield that’s adjusted higher to account for the inflation rate. The so-called real yield \u2014 which doesn’t include that adjustment \u2014 is currently at 2.93% for 30-year US Treasury Inflation Protected Securities, having peaked at 3.04% on Friday, the highest since 2008. <\/p>\n
Elsewhere, Kevin Kidney has boosted True Potential Investments LLC’s inflation-linked sovereign holdings to about 20% of the firm’s total fixed-income investments. He worries central banks, and the US Federal Reserve in particular, are happy to accept a faster pace of price growth. <\/p>\n
“We believe that central banks are willing to accommodate a higher level of inflation than they communicate,” Kidney said. <\/p>\n","protected":false},"excerpt":{"rendered":"(Bloomberg) — Barclays Plc and HSBC Holdings Plc say concern the Federal Reserve is dragging its feet on…\n","protected":false},"author":2,"featured_media":41713,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[20667],"tags":[13786,5897,33514,9881,20122,41917,41918,32055,4512],"class_list":["post-99200","post","type-post","status-publish","format-standard","has-post-thumbnail","category-hsbc","tag-barclays-plc","tag-bloomberg","tag-federal-reserve","tag-hsbc","tag-hsbc-holdings-plc","tag-inflation-linked-bonds","tag-kevin-kidney","tag-kevin-warsh","tag-price-growth"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@UnitedKingdom\/117054076534298241","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/99200","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/comments?post=99200"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/99200\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media\/41713"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media?parent=99200"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/categories?post=99200"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/tags?post=99200"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}