Monday, March 14, 2016

BlackRock: "Why Now May Be the Time for TIPS"

From BlackRock's blog, March 2:
Matthew Tucker, CFA
Head of iShares Americas Fixed Income Strategy 
Matt Tucker explores the recently-resurfaced inflation conversation and discusses why now may be the time to revisit Treasury Inflation Protected Securities (TIPS). 
I’m not sure if you noticed, but last month marked a bit of a milestone: The Labor Department noted that its Consumer Price Index, excluding food and energy, increased 0.3 percent in January, after a 0.2 percent gain in December. That doesn’t sound like much, but consider the context: It’s the most we’ve seen since August 2011. Indeed, inflation has been stubbornly low in recent years, but the Fed has continued to hint that inflation is just around the corner, and the market has been eagerly anticipating it. 
Why it’s Time to Take Notice of Inflation (Really)I talked about this a bit last year, at a time when inflation was muted, andbreakevens, or market expectations for inflation, were turning up. I explained how break-even inflation and CPI indicators compared 2014-2015, and this is what we saw:
Now let’s take a look at it almost a year later:
We can see that headline inflation has broken out of its near 0 percent level and is up to 1.4 percent annualized. If we look at CPI ex food and energy, we see a similar pattern: recent increases have pushed inflation up to 2.2 percent. And while it may seem like the little boy who cried wolf — the story gets a little mixed when inflation expectations crashed mid-2015 — we can see that expectations have recently resurfaced, climbing back towards the 1 percent level....

"Is US inflation (finally) rising?"
Inflation: TIPS Breakevens Start to Rise as Economic Data Improves
No Inflation? Look At This (#3 will shock you)
"The Treasury Market Raises Its Inflation Outlook" (buy TIPS)
The Velocity of M1 Money Stock May Have Stopped Declining
A Look At The Consumer Inflation Numbers
You Want Inflation, "Why doesn’t the ECB just buy oil?"