In defence of a financial instrument that fails to do its job
Inflation-linked bonds are a poor inflation hedge, but that’s not the point
Although buying inflation-protected bonds to protect against inflation does not seem unreasonable, it would have been a spectacularly unprofitable move during the latest bout of inflation. One hundred dollars put into inflation-protected Treasuries in December 2021, when investors first saw American core inflation reach 5%, would have been worth just $88 a year later. Even cash under the mattress would have done better.
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This article appeared in the Finance & economics section of the print edition under the headline “Inflated worth”
Finance & economics February 17th 2024
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- In defence of a financial instrument that fails to do its job
From the February 17th 2024 edition
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How Trump, Starmer and Macron can avoid a debt crunch
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Should investors just give up on stocks outside America?
No, but it is getting a lot harder to keep the faith