“Regarding your recent comments that the game is up for the US/UK government bond markets, do you think the same way about the inflation linked bonds? Many thanks.”

Eoin Treacy's view Thank you for this interesting question. The yields for TIPS and UK inflation protected Gilts in the Chart Library depict real yields. Unsurprisingly they are negative since CPI inflation is currently higher than corresponding government bond yields in both countries. This situation is unattractive when a benign economic environment is considered.

The Barcap US Inflation Linked Bonds Total Return Index lost momentum from August and last week pulled back to test the progression of higher reaction lows. A sustained move below the 200-day MA, would confirm Type-2 medium-term top formation completion.

The Barcap UK Inflation Linked Bond Total Return Index accelerated higher between November and January. It has now posted its largest reaction since 2008 and completely unwound the overbought condition relative to the 200-day MA. It will need to find support in the current region if the medium-term uptrend is to remain credible.

If subscribers have additional views we would welcome the input.