Highlights

  • There is potential for a significant repricing of future inflation expectations and inflation risk premium.
  • We believe higher inflation expectations and Fed dynamics can eventually lead to higher-than target inflation and a repricing of long breakevens.
  • In this environment, we favor softer duration instruments like TIPS to help offset the risk of a steepening yield curve.
  • In a period of record-breaking deficits and quantitative easing, we believe supply and demand technicals may lend even more support to TIPS relative to nominal Treasurys.

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