Prices of Inflation-Linked Bonds Rise Amid Tariff Uncertainty
Funds Flow into Inflation-Linked Bonds as Investors Seek Inflation Hedges
As uncertainty grows due to the tariff policies of the Donald Trump administration in the United States, funds are flowing into bonds that can hedge against inflation.
Bloomberg reported on the 8th (local time) that the Bloomberg Global Inflation-Linked Index, a bond index composed of inflation-linked bonds worldwide, has risen about 5% from January 13, before President Trump's inauguration, to June 6 of this year.
The index fell about 4% last year, marking the largest decline among Bloomberg's 20 major bond indices. However, this year, the expansion of President Trump's tariff front has caused a sharp drop in the stock market and a weakening of the dollar, affecting government bond yields and leading to a rise in inflation-linked bond prices. This reflects concerns about inflation and the possibility of interest rate hikes by the Federal Reserve (Fed).
Bloomberg explained that there are signs investors are worried about price fluctuations across the economy, noting that short-term inflation expectations have risen above long-term inflation expectations.
Bob Prince, co-Chief Investment Officer of Bridgewater Associates, said in a memo last week, "If prices rise again, inflation-linked bonds are a very good choice." Mark Caplan, a strategist at Bank of America, also anticipated that individual investors' interest in short-term inflation-linked Treasury funds would increase due to risks stemming from uncertainty surrounding tariffs and other policies.
These bonds generally have long maturities, so bond prices are also expected to rise when interest rates fall.
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