Invesco Perpetual's Edwards: Could linkers surprise on the upside?

ON BONDS

Investors that sought comfort in inflation-linked bonds have been disappointed as inflation has been steadily falling in the Western world. But this is just a blip, and investors could now see more success from linkers, argues Invesco Perpetual's Stuart Edwards.

Inflation expectations After the crash of Lehman Brothers, with subdued or negative growth in the developed markets and with central banks expanding the monetary base through quantitative easing, many investors saw the appeal of inflation-linked bonds (linkers). The argument was that growth in narrow money would generate broad money growth, which eventually would drive up inflation. Hence the returns of linkers would be boosted and they would outperform conventional bonds. Investors acting in anticipation of such a rally in linkers have been disappointed. Deleveraging and problems ...