Weekly Inflation Roundup: Right-Side Tail is Beginning to Show Up

The blue wave has ignited a jump in nominal Treasury yields, while real yields refuse to follow along. The Federal Reserve’s new AIT framework suggests dovish policy will persist in the face of rising inflation (if it really happens). TIPS breakevens have already produced record high Sharpe ratios, but have room to run according to risk assets.

TIPS are the Surprising Star of 2020

U.S. 10-year TIPS look poised to become the shining star of 2020 with a Sharpe ratio of 1.26. In fact, TIPS have not taken the top spot according to Sharpe ratios since 2002.