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Barclays: Buy inflation-protected assets to prepare for Trump 2.0
On June 29th, Jin10 Data reported that for Barclays' interest rate strategists who watched Thursday's presidential candidate debate, the trade was clear: buy inflation hedging assets in the US Treasury market. As the possibility of former President Trump replacing current President Biden in the November 5th election seems to increase, the market should "consider the significant risk of higher than target inflation rates in the coming years." They wrote that this simple trade is betting that 5-year inflation-indexed bonds (TIPS) will outperform regular 5-year government bonds, leading to an expansion of the yield differential between the two. Barclays predicts that the breakeven rate, which represents the market's implied expectation of average inflation rate within the bond term, will increase from the current level of around 2.25% to 2.5%.