There is no direct evidence on the illiquidity premiums in TIPS yields and on
inflation risk premiums, so we rely on indirect evidence and model-based estimates.
Nonetheless, the breakeven spread is still the cost one pays to insure against upside
inflation risk, and at present we think that this insurance is very cheap.
Finally, the model, as posed, severely restricts the price of
inflation risk by fixing the price of
inflation risk at unity.
If aluminum prices don't recede further, we still see cost
inflation risk for the beverage industry with Coca-Cola, Cott and Molson Coors Brewing being the most exposed in our view.
3) The first one attributes the current low level of the long bond rate to the lowering of the
inflation risk premium.
Instead, we believed that full employment was not inherently inflationary; in fact, we saw the greater
inflation risk in stagnation itself.
Interest savings are based on the assumption that the Treasury can capture most of an
inflation risk premium embedded in nominal bond yields and will benefit from a further decline in inflation.
There has always been pressure on the Federal Reserve for ``easy money,'' and the case that the
inflation risk should be downgraded in favor of more monetary stimulus remains very much a minority view, at least among economists.
The aim of the SPDR Barclays EM Inflation Linked Local Bond UCITS ETF is to track the performance of government bonds from individual emerging-market countries in local currencies with protection against
inflation risk.
The rising prices of food and energy this year drive up the
inflation risk.
Maintaining the (rate) would have portrayed the MPC as overly averse to
inflation risk," he said.
This Commentary explains how the output of the model gives us cleaner, more useful estimates of inflation expectations and
inflation risk, and what those expectations might imply for monetary policy.
