Tag Archives:

inflation

What should the relationship be between index-linked bond yields and equity yields?

There ought to be a relationship between yields available on equities (earnings or dividend yields) and those on index-linked gilts and other inflation-linked bonds.  Ex-ante, and adjusted for risk, expected returns should be similar across asset classes.  In the case of equities and index-linked bonds, both asset classes give you exposure to “real” returns on both income and capital.  For inde…

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Inflation Surprises – what’s driving the current increases in market- and survey-based indicators of inflation expectations?

(blog originally posted on www.bruegel.org)

Euro area consumer price inflation, as measured by the HICP, continues to undershoot the ECB’s target of “close to, but below 2%”, currently at -0.1% in March. While it is still too early to tell if the ECB QE programme launched on March 9 will manage to bring back inflation towards the target in the medium term, a look at market- and survey-based inf…

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Explaining the collapse in global inflation rates – step forward China

We’ve been worried for years about the prospect of a sharp slowdown in China and the knock on implications for those countries and companies that have grown reliant on a strong China over the last decade, namely commodity exporters, some emerging markets, and particularly emerging market commodity exporters (eg see If China’s economy rebalances and growth slows, as it surely must, then who’s sc…

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Tweet inflation survey March 15

The M&G YouGov Inflation Expectations Survey – Q1 2015

Economic policy hawks love inflation expectation surveys. As do bond fund managers, who like to keep a close eye on inflation to ensure that fixed income returns aren’t being eroded away. Provided that inflation expectations are close to target, we tend to argue expectations are well anchored and thus central bankers can rest easy. However, the monetary policy actions undertaken by many central…

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2015-03 blog

Falling consumer and oil prices may not provide the boost to growth many are expecting

The spectre of deflation currently haunts central bankers around the world, though many of us would question whether the true effects of falling prices are being felt in the real economy and more importantly in consumers’ wallets.

According to the results of the M&G YouGov Inflation Expectations Survey over the past two years, European consumers often believe that inflation in one and five year…

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A rallying bond market means duration lengthens

Either longer dated index linked gilts are very vulnerable, or the UK economy is

If at the beginning of 2014 you had made a list of what you thought would be the best performing fixed income asset classes globally for the coming year, it’s very unlikely you’d have put UK index-linked gilts at the top. It’s probably even less likely that you’d have put Argentina’s (hard currency) bond market in second place, especially if you had been told that Argentina would default in 201…

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UK QE and asset prices

Conservative QE and the zero bound.

It has been a while since we talked about QE, but we covered this substantially in the past (see for example ‘Sub Zero?’,  ‘QE – quite extraordinary‘ and ‘Quantitative easing – walking on custard‘). It now appears, at least for the time being, to be a part of monetary history in the UK, and more recently the US. However, it is being reapplied in Japan and about to do a grand tour of Europe. Our…

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The M&G YouGov Inflation Expectations Survey – Q3 2014

The results of the August 2014 M&G YouGov Inflation Expectations Survey suggest that inflation expectations have moderated across the UK, most European countries and Asia. Short-term inflation expectations in the UK have fallen from 2.3% to 2.2% after an upwards bounce in the May survey. However, over a five year period, expectations remain unchanged at 3.0% for the 7th consecutive quarter. UK …

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Exceptional measures: Eurozone yields to stay low for quite some time

Richard recently wrote about the exceptional times in bond markets. Despite bond yields at multi-century lows and central banks across the developed world undertaking massive balance sheet expansions the global recovery remains uneven.

Whilst the macro data in the US and UK continues to point to a decent if unspectacular recovery, the same cannot be said for the Eurozone. Indeed finding data to…

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Race to the Bottom: Eurozone Inflation Rates

In principle, the European Central Bank (ECB) is well in line with its price stability objective, which it defines as a “year-on-year increase in the Harmonised Index of Consumer Prices (HICP) for the euro area of below 2%”. Nonetheless, July inflation numbers released last week bring the currency union as a whole dangerously close to deflationary territory. The aggregate HICP annual rate of ch…

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