Fears over future inflation spikes and the ability of the Bank of England to control rising prices have led bond managers to take cover in protective instruments.
Last week, the Office for National Statistics (ONS) announced annual consumer prices index (CPI) inflation had jumped sharply from 2.2% in September to 2.7% in October, while annual retail prices index (RPI) inflation spiked from 2.6% to 3.2%. The Bank of England also raised its forward CPI projections, suggesting inflation will not fall back to its 2% target as soon as previously thought. Although analysts attributed much of the October increase to one-off factors, bond investors are now concerned about further unexpected rises, with many boosting their exposure to index-linked bonds. ...
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