MORGAN STANLEY: ‘There’s A Storm Coming’ In The TIPS Market
Jan. 11, 2013
Morgan Stanley interest rate strategist Anton Heese’s latest note to clients comes with an ominous warning in its title:
“There’s a Storm Coming.”
Heese is referring to the market for Treasury Inflation Protected Securities, or TIPS. This class of government bonds – inflation-linked securities – was a clear outperformer in 2012. Heese points out that the Barclays World Government Inflation Bond index gained about 7 percent in returns last year, while Treasuries only returned 2.1 percent, Bunds rose 4.5 percent, and Gilts gained 2.8 percent.
Now, inflation-linked bonds – like Treasury Inflation-Protected Securities (TIPS) in the United States – are looking pretty expensive too, and that has Heese convinced that there is a storm coming in the TIPS market.