Investors have a once-in-a-decade opportunity to lock in real yields of 2.5%, which is 0.5% above the economy’s potential growth rate, with the realized inflation optionality on top. Inflation-linked bonds are becoming certainly an attractive sector in the fixed-income landscape!
This could provide a buffer against inflation, but it also comes with the risk of significantly increasing the debt burden and setting the economy on an unsustainable path. This is not just a problem for the US, but for many other countries, particularly in peripheral Europe: Italy, Greece, Portugal, Spain to name a few. Debt sustainability can come back as one of the BIG macro themes soon 🔜. Alternatively, Central banks 🏦 have to give up on inflation fighting: something gotta give! I am still convinced the second scenario is the most plausible but in terms of sequencing it may happen after bond vigilantes excerpt increasing preassures on long end rates and spreads! #stevedonze #giorgiovintani #tombaldacci #inflectionpoint
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