At least, ten-year TIPS are. They've mostly pulled back from their 1.5% gain in January; at the rates that prevailed yesterday, they're indicating a 10-year inflation rate of 2.25% per annum. As of January 11th, the indication was for 2.49%.
The question is: are inflation expectations still too high, or the TIPS pullback taking place for other reasons? At that price, the yield's 1.46%. That can be seen as the expected real rate over the next ten years. An increase in demand for credit will push the real rate up.
However, it's the decreased differential that's sending the message; regular 10-year bonds have not been following in TIPS' wake. According to Kurt Brouwer, PIMCO sees the 2010 U.S. inflation at 1%. That rate makes TIPS a lousy deal compared to straight 10-year Treasuries.
The question remains, though: have TIPS pulled back because the inflation story is no longer viable, or did they simply get ahead of themselves last month?
Subscribe to:
Post Comments (Atom)
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/gold/tny_au_en_usoz_2.gif)
No comments:
Post a Comment