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U.K. Above-Target Inflation May Spur Higher Break-Even Rate, Barclays Says

The difference between yields on 10- year gilts and index-linked securities may widen as U.K. inflation persistently exceeds the Bank of England’s 2 percent target, Barclays Plc said.

“The market appears to be only modestly pricing in upside risks to inflation from easy monetary policy,” London-based analysts Moyeen Islam and Henry Skeoch wrote in a note to investors dated yesterday. “Now may be the time to consider acquiring inflation protection, given the macroeconomic uncertainty.”

The 10-year break-even rate, a measure of consumer-price expectations based on the difference between yields on inflation-linked bonds and conventional securities, was little changed at 2.91 percentage points as of 9:11 a.m. in London. It reached 2.92 percentage points yesterday, the most since July 1.

To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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