AGL 40.06 Increased By ▲ 0.06 (0.15%)
AIRLINK 127.01 Decreased By ▼ -0.03 (-0.02%)
BOP 6.67 No Change ▼ 0.00 (0%)
CNERGY 4.50 Decreased By ▼ -0.01 (-0.22%)
DCL 8.50 Decreased By ▼ -0.05 (-0.58%)
DFML 41.45 Increased By ▲ 0.01 (0.02%)
DGKC 86.65 Decreased By ▼ -0.20 (-0.23%)
FCCL 32.25 Decreased By ▼ -0.03 (-0.09%)
FFBL 64.72 Decreased By ▼ -0.08 (-0.12%)
FFL 10.22 Decreased By ▼ -0.03 (-0.29%)
HUBC 109.50 Decreased By ▼ -0.07 (-0.06%)
HUMNL 14.49 Decreased By ▼ -0.19 (-1.29%)
KEL 5.06 Increased By ▲ 0.01 (0.2%)
KOSM 7.49 Increased By ▲ 0.03 (0.4%)
MLCF 41.35 Decreased By ▼ -0.03 (-0.07%)
NBP 60.50 Increased By ▲ 0.09 (0.15%)
OGDC 189.80 Decreased By ▼ -0.30 (-0.16%)
PAEL 27.79 Decreased By ▼ -0.04 (-0.14%)
PIBTL 7.83 No Change ▼ 0.00 (0%)
PPL 149.70 Decreased By ▼ -0.36 (-0.24%)
PRL 26.90 Increased By ▲ 0.02 (0.07%)
PTC 16.01 Decreased By ▼ -0.06 (-0.37%)
SEARL 86.02 Increased By ▲ 0.02 (0.02%)
TELE 7.69 Decreased By ▼ -0.02 (-0.26%)
TOMCL 35.45 Increased By ▲ 0.04 (0.11%)
TPLP 8.13 Increased By ▲ 0.01 (0.12%)
TREET 16.25 Decreased By ▼ -0.16 (-0.98%)
TRG 53.14 Decreased By ▼ -0.15 (-0.28%)
UNITY 26.20 Increased By ▲ 0.04 (0.15%)
WTL 1.25 Decreased By ▼ -0.01 (-0.79%)
BR100 9,992 Increased By 108 (1.09%)
BR30 31,159 Increased By 558.7 (1.83%)
KSE100 94,116 Increased By 760.8 (0.81%)
KSE30 29,153 Increased By 222.2 (0.77%)

In a weak global economy, inflation may be years away. But once it erupts, investors could find they can't get enough inflation-linked bonds. These debt instruments offer security for investors by keeping pace with rising prices in the economy. They carry big risks for the governments that issue such bonds because when inflation rears its head, they cost the issuer and by extension taxpayers, much more than nominal debt securities.
So governments are loath to issue too many Treasury Inflation Protected Securities (TIPS), analysts say. As investors fret about the impact of multi-trillion dollar stimulus spending and liquidity injections, they are looking for ways to defend their savings against lurking inflation.
TIPS is one route, and market players might be wise to get ahead of the game and buy them now, before demand outstrips a relatively small pool of supply, said analyst Don Coxe. "What we are doing is monetary creation on an unprecedented scale and you absolutely have to protect yourself against the possibility of things going wrong as they did back in the 1970s," said Coxe, head of Coxe Advisors LLC in Chicago, which consults clients of the BMO Financial Group.
There is a risk inflation will ignite in a year or two once central banks start to withdraw emergency cash injections. Some see similarities with the 1970s, a decade that began with a recession that led to double-digit inflation. A drop in the dollar and rise in gold this week hint investors are already worried about this scenario.

Copyright Reuters, 2009

Comments

Comments are closed.