Bond-Market Inflation Outlook

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Flaccidsteele
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Bond-Market Inflation Outlook

Post by Flaccidsteele »

I'm seeing a lot of "inflation is coming" in the US media recently. Are they wrong? Just wondering what people think and how this may affect inflation in Canada.

Bond-Market Inflation Outlook Picks Up After Trump Victory
JaydoubleU
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Re: Bond-Market Inflation Outlook

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There are also quite a few pundits who fear a major hangover after this Trump party:

https://www.bloomberg.com/news/articles ... -of-growth

Lack of productivity growth, aging populations, excessive debt . . .
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ghariton
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Re: Bond-Market Inflation Outlook

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Flaccidsteele wrote:I'm seeing a lot of "inflation is coming" in the US media recently. Are they wrong? Just wondering what people think and how this may affect inflation in Canada.
Bank of Canada shows long term (32 years to maturity) nominal bonds yielding 2.25% and long term (28 years to maturity) real bonds yielding 0.43%. The spread of 1.82% covers both anticipated inflation and a premium for insurance against unanticipated inflation. The size of that insurance premium is not known with any precision, but usual estimates range from 0.5% to 0.8%. Subtracting, expectations for anticipated inflation range between 1.0% and 1.3%.

Remember, that's an average over the next three decades. (I think that's much too low, but what do I know.)

George
The juice is worth the squeeze
Flaccidsteele
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Re: Bond-Market Inflation Outlook

Post by Flaccidsteele »

JaydoubleU wrote:There are also quite a few pundits who fear a major hangover after this Trump party:

https://www.bloomberg.com/news/articles ... -of-growth

Lack of productivity growth, aging populations, excessive debt . . .
Yeah I read this as well but the same issues (i.e. lack of productivity, aging populations, excessive debt) existed before Trump so basically nothing has changed.

"Trump rally" is temporary anyway. Like all rallies.
ghariton wrote:Bank of Canada shows long term (32 years to maturity) nominal bonds yielding 2.25% and long term (28 years to maturity) real bonds yielding 0.43%. The spread of 1.82% covers both anticipated inflation and a premium for insurance against unanticipated inflation. The size of that insurance premium is not known with any precision, but usual estimates range from 0.5% to 0.8%. Subtracting, expectations for anticipated inflation range between 1.0% and 1.3%.

Remember, that's an average over the next three decades. (I think that's much too low, but what do I know.)

George
Very interesting. Thanks for this.

I agree that the expectations for anticipated inflation seems low. Not sure why I'm reading more "inflation is coming" articles when nothing has really changed.
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Re: Bond-Market Inflation Outlook

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I agree that the expectations for anticipated inflation seems low. Not sure why I'm reading more "inflation is coming" articles when nothing has really changed.
Fear? The odds of a rate hike this month have risen to 100%. Trump is expected to cut taxes and various regulations to stimulate the economy. Those measures might be inflationary, but he also talks about tampering with trade deals, TPP and NAFTA. Upsetting global trade or starting protectionist policies could have disastrous consequences. Right now, a soaring US dollar may be deflationary for the US, as its exports become too expensive and imports become cheaper. Still, all this seems very speculative.

The global economy is still very weak. Nothing has changed. Yet.
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Re: Bond-Market Inflation Outlook

Post by gaspr »

Interesting article by Michael Batnick regarding bonds...

http://theirrelevantinvestor.com/2016/1 ... he-reaper/
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Re: Bond-Market Inflation Outlook

Post by Flaccidsteele »

Is inflation dead yet? It feels like it’s dying...
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Re: Bond-Market Inflation Outlook

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Flaccidsteele wrote: 09 Mar 2020 13:28 Is inflation dead yet? It feels like it’s dying...
CRB Commodity Index has now taken out 2016 lows and heading straight down, so we won't see it anytime soon.

https://www.bloomberg.com/quote/CRY:IND
Too much cheap money sloshin’ around the world. First mistake we ever made was letting Nixon get off the gold standard – Lou Mannheim, Wall Street
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