Investors are defending their defenses against the rapid rise in US inflation

Investors are taking more measures to protect themselves from U.S. inflation, which is hotter than expected in the coming years, as the final price concerns concerns about growth, despite the easing of bond sales.

A measure calculated by the Minneapolis Federal Reserve to trade in options suggests one in three options to raise the U.S. consumer inflation rate by more than 3 percent over the next five years.

Rising to the highest level of probability in eight years shows how traders are trying to protect themselves against the sustained rise in inflation even though many Wall Street economists still expect only a gradual rise in prices on the horizon as economic growth accelerates.

Investors released data last week to buy $ 14.4 billion inflation-protected treasuries In 2021 they have added more evidence to suggest that money managers are eager to protect their portfolios.

“It’s not that the market has become inflationary. The market is not safe, ”said David Riley, chief investment strategist at BlueBay Asset Management.

Fear of inflation has shaken the $ 21 billion market in U.S. government debt, which lays the groundwork for global borrowing costs, as faster price growth eats up fixed-income streams that provide bonds. The old treasuries suffered the heaviest sold in four decades in the first quarter of this year, Joe Biden’s $ 1.9 million stimulus program and improved vaccine spread improved the economic outlook.

However, sales in recent weeks have lost ground as the yield on the 10-year-old Treasury fell to around 1.55 per cent from nearly 1.8 per cent at the end of March. Yields fall as prices rise.

Riley said Minneapolis Fed data showed traders are worried about higher inflation but are not sure if it will materialize. “I think if the market really keeps prices above the Fed’s inflation target over the next year and beyond, I think [yields] it would make more sense, ”he said.

However, Arend Kapteyn, chief economist at UBS investment bank, said investors have a “first and foremost question” mentality when it comes to hedging against inflation.

Faith officials see them as risks to inflation “Overall balanced”, according to the minutes of the March meeting, policy makers said they point to forces that could drive price growth in both directions.

The central bank targets inflation at around 2 per cent, although it has said it is ready to overcome it to make up for the shortcomings of the past. Consumer prices rose at a year-on-year rate of 2.6% in March, but economists said that rapid growth was caused by large jumps in energy prices. The “basic” measure that excludes food and energy is 1.6 percent lower.

There has been a steady rise in prices and a disorderly rise in bond yields leading the list of investor concerns since March, ahead of Covid-19, according to a survey of Bank of America fund managers.