tag:blogger.com,1999:blog-5908830827135060852.post8564212502877250812..comments2024-03-29T02:54:56.523-04:00Comments on Bond Economics: What Is The 10-Year TIPS Breakeven Telling Us?Brian Romanchukhttp://www.blogger.com/profile/02699198289421951151noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-5908830827135060852.post-17808567428059532292021-08-20T07:08:19.250-04:002021-08-20T07:08:19.250-04:00This comment has been removed by a blog administrator.Rehmat Kinghttps://www.blogger.com/profile/11577720244522095761noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-12729370486744946772020-06-03T08:51:17.640-04:002020-06-03T08:51:17.640-04:00This comment has been removed by a blog administrator.gf2811936@gmail.comhttps://www.blogger.com/profile/08687825921072597065noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-29147185134862776992020-02-27T06:14:32.977-05:002020-02-27T06:14:32.977-05:00This comment has been removed by a blog administrator.webtoonxyzhttps://www.blogger.com/profile/00587308001880140788noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-83592908467632911522018-12-21T21:32:27.675-05:002018-12-21T21:32:27.675-05:00This comment has been removed by a blog administrator.Bloggerhttps://www.blogger.com/profile/07287821785570247118noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-46805149354067345542017-12-22T10:41:40.497-05:002017-12-22T10:41:40.497-05:00Thanks. I did note that I do not have access to th...Thanks. I did note that I do not have access to the finding differential, and that adjustment should be made to the raw breakeven. (I discussed that earlier, and so I did not want to repeat myself too much.)<br /><br />My difficulty with inflation swaps is that they are a one-way market; the only natural payers are dealers doing asset swaps on linkers. I was with a Canadian buy side institution, so I am not an expert on the details (there was no market in CAD inflation swaps).My feeling is that “technical factors”can move inflation swaps a lot.<br /><br />As for the optionality, I was burying that effect into “expectations”. My fair value for trading purposes is not necessarily the median of my forecast. I am still collecting my thoughts for the report, and I would discuss that effect in another section. However, thanks for bringing it up, so that I hopefully remember to discuss it somewhere. It is obviously a strucural factor that hangs over the market.<br /><br />Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-45679632262421710302017-12-22T10:25:25.368-05:002017-12-22T10:25:25.368-05:00Decent article. Actually breakevens are biased low...Decent article. Actually breakevens are biased low, and have been forever, for reasons I cover here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1892180 In a nutshell, since TIPS almost never go on special in the financing markets and nominal Treasuries are almost always special, a long position in breakevens always carries worse than a short position, so it needs to be lower than expectations to compensate for this effect. <br /><br />A better measure is inflation swaps; 10yrs are currently at 2.20%. But keep in mind that any fair bet on inflation - such as an inflation swap - should be higher than the market's guess as to ACTUAL inflation since inflation has long tails to the upside; ergo there's an option value to being long BEI as opposed to short. Michael Ashtonhttp://www.enduringinvestments.comnoreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-12195301494350784602017-12-20T15:34:15.628-05:002017-12-20T15:34:15.628-05:00That’s the “Boskin Risk.” I started covering TIPS ...That’s the “Boskin Risk.” I started covering TIPS around the year 2000 or so, and TIPS investors substituted his name for various cuss words in discussions. It may be that younger investors are less triggered by his name... (As a Canadian, I didn’t have a dog in that fight.)<br /><br />The thing is that TIPS investors have an extremely potent lobby on their side - the oldsters. Their pension payments get whacked by CPI fiddling. My bias is that I could hide behind them, and they would do the dirty political work for me. (Of course, I would probably be firmly in the oldster camp when this might matter.)Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-17450708988333365712017-12-20T14:02:10.479-05:002017-12-20T14:02:10.479-05:00As an investor in TIPs I can tell you another sour...As an investor in TIPs I can tell you another source of "premium." In a truly bad inflationary scenario (sustained 4%+ inflation) I believe it is probable that the government would fiddle with the CPI calculation to lower measured inflation and cpi-linked payments.Anonymousnoreply@blogger.com