UBS maintains a neutral view on TIPS, noting their attractiveness in the current stagflationary environment driven by energy shocks and high real yields. Positive carry from recent CPI spikes and a shift in the forward inflation curve support the asset class.
Key Takeaways
- 1.TIPS are well-positioned for the current environment of modest growth and elevated inflation, particularly following energy price shocks.
- 2.Real yields are currently attractive, with the 10-year TIPS real yield at 2.14%, providing a supportive entry point compared to previous years.
- 3.A supportive 'carry' environment is expected for the next two months due to inflation indexation lags and recent high CPI readings.
Table of Contents
- Upside scenario
- Downside scenario
- Global asset class preferences definitions
- Appendix
- Risk Information
- Generic investment research – Risk information:
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Authors
Tom NashFrederick Mellors
Securities
US 10-Year TIPS Real Yield10-year breakeven inflation rate
Themes
Stagflationary Macro EnvironmentFed Leadership TransitionEnergy Price Shocks
Regions
North AmericaGlobalUnited States