Wednesday, February 23, 2011

Yet more tips on TIPS

Since I wrote a few tips on TIPS, Nomura has come up with some very interesting research:

First, they note that for Turkey, the correlation between real yields and core inflation is stronger than the correlation between breakevens and core inflation:
What does this mean? They have written their interpretation at the top of the graph, but I would be more interested on the impact of core inflation on nominal yields, which you can guesstimate from the info. given by Nomura...

In a separate note, they argue that nominal bond rates in EMEA have already moved a lot, and unless core inflation rises, we are not likely to see further rises in yields. But the one country they expect an upward move in core inflation is..........Turkey..........
As you can see, they have also calculated real rates and brekaeven inflation (both 5-year) for four countries, including Turkey, so Arigatoo Gozaimasu, Nomurasan!:)

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