Читать книгу The Foreign Exchange Matrix - Barbara Rockefeller - Страница 41

Fixed income traders, Federal Reserve Board members and a growing number of currency, commodity and equity traders watch inflation breakevens and swaps. The inflation breakeven level is the difference between the nominal yield on a given fixed income instrument and the real yield on an inflation-linked instrument of the same maturity.

US market players refer to the breakeven spread as the difference between a Treasury instrument and a TIPS instrument with a comparable maturity. For instance, the 10-year US Treasury note might offer a 4.0% yield, whereas a Treasury Inflation Protected Securities instruments (adjusted for consumer price inflation) might only offer a yield of 3.0%. If (CPI-U) inflation is greater than 1.0%, then the TIPS would be the better deal.

The other factor to consider is that the TIPS market is far less liquid that the larger Treasury market, which can also skew prices at times. In addition to looking at US/TIPS breakevens, traders also track breakevens in the euro zone, UK, Japan and other countries that offer an inflation-protected alternative to their benchmark bond instruments.

Breakevens and inflation swap movements give insight not only into inflation, but also risk for other asset classes. If breakeven spreads are widening globally and market players are willing to pay more for inflation swap protection, as was the case at the start of 2011, this suggests that inflation expectations are growing and it might be wise to look at an inflation hedge. Investors might buy gold or other commodities, or look to buy commodity currencies like the Canadian and Australian dollars, for protection.

We go in to more detailed discussion of breakevens and interest rate swaps in Chapter 4 on interest rate differentials and expectations.