Paul Borean's blog
For all the focus on political wind changes, one constant in the background is that there is limited appetite for additional monetary stimulus across major developed market central banks. Fiscal and monetary policies have linkages, with changes in one having cyclical implications for the other. We briefly examine some highlights from the North American policymaking sphere, including aspects of how we are presently positioned in light of the balance of risks to the outlook.
Many markets for inflation-linked bonds (also referred to as “linkers”) were born out of investor demand for both the safety of government debt relative to comparatively more credit risky borrowers, as well as real income that is protected from the risk of higher inflation. Although the income potential has been gradually squeezed from these assets as real interest rates have fallen, inflation protection remains a potent feature of linkers, and one that has seen considerable variation in demand in recent years.