Cazenove's Dean: Bond markets signal inflation

Western bond market are pointing to the risks of resurgent inflation, although the Fed claims price pressures are not building rapidly, says Cazenove's Julie Dean.

Dean, the manager of the £50m Cazenove UK Opportunities fund, says yields on US 10-year treasuries have risen 100bp since QE2, as signs of improving growth sit uneasily with very loose money. She says: "If bond markets believed demand to be truly robust then prices could be better absorbed, but perhaps they recognise, like us, this is not a bonafide business cycle." Dean warns credit surges usually lead to misallocation of capital and new bubbles follow. Although the East is responding to this, the Fed continues to hold interest rates down at pre-crisis levels. "At present, the Fed...