markets

Goldman Asset likes inflation bonds amid best rally since 2012

TIPS have returned 6.9 per cent in 2016, heading for their biggest gain since 2012

Bloomberg
14:11 October 15, 2016

Singapore: Goldman Sachs Asset Management is recommending Treasury Inflation Protected Securities as the bond market signals consumer prices are poised to rise.

“We like them a lot,” Mike Swell, the co-head of global portfolio management for fixed income in New York, said in an interview on Bloomberg Television Tuesday. “Investors are catching up to what a lot of us in markets already know, that inflation is picking up.” The firm invests or advises on more than $1 trillion of assets, according to its website.

TIPS have returned 6.9 per cent in 2016, heading for their biggest gain since 2012, according to Bank of America Corp. indexes. Nominal Treasuries have returned 4.3 per cent this year.

The benchmark US 10-year note yield was little changed at 1.77 per cent as of 10:28am in Tokyo, according to Bloomberg Bond Trader data. The price of the 1.5 per cent security due in August 2026 was 97 19/32.

The difference between yields on 10-year notes and same-maturity TIPS, a gauge of trader expectations for consumer prices over the life of the debt, climbed to 1.69 percentage points Tuesday, approaching the Federal Reserve’s inflation target of 2 per cent. The figure has risen from as low as 1.12 points in February.