Yesterday the US 30yr break-even (the difference between the nominal yield on a conventional bond and the real yield on an inflation-indexed bond of the same maturity) moved to a multi-week high, this suggests that the crowd is again becoming concerned about inflation. Ok, the absolute level of the breakeven is not so important rather, it is the general direction of the breakeven. From our perspective the general direction of the breakeven is up.
US 30yr Breakeven (short term)
click to enlarge
Sometimes it helps to look at things from a very long term perspective. Note how the US 30yr breakeven is more or less at a multi-month high. The market is clearly telling us that inflation is on the rise even if the official inflation rate stats are “benign”.
US 30yr Breakeven (long term)
So what four trades, in different markets, would best position a trader for a pick-up in inflation? Try these four ideas, long the AUDJPY, DBC, TBT, XLB.
Disclosure: Long FXA, DBC, TBT, XLB, XLE
No comments:
Post a Comment