Monday, July 7, 2008
So-called inflation-linked bonds are yet another rip-off
Two articles (see inside): ECONOMIST: "Higher inflation is not all bad news for the government. The race to buy index-linked bonds, which protect their owners against future price rises, is so intense that the 50-year gilt was offering a real (after-inflation) yield of just 0.3% in trading last week. That is a very cheap way [for governments] to borrow money. One interpretation of this trend is that the markets have lost faith in the Bank of England's ability to control inflation." BLOOMBERG: "Treasury Inflation Protected Securities aren't living up to their name for bond investors who say they can't trust the way the U.S. government calculates the rising cost of consumer goods. 'The consumer price index underestimates inflation', said ..." HPC SUMMARY: Inflation is ripping off everyone.