Inflation-Bond Spreads Rise as Central Bank Acts: Canada Credit

Canada’s real-return bonds are signaling faster inflation as the nation’s central bank keeps its target interest rate unchanged amid concern that the global economic recovery is faltering.

The breakeven rate on 10-year inflation-protected bonds, a measure of what investors predict for average consumer price inflation during that period, touched 2.132 percent yesterday, the highest level since June 3. Canada’s inflation rate will climb toward the central bank’s 2 percent target on rising agricultural prices and tuitions, as well as fewer discounts for clothing, Bank of America Merrill Lynch said in a report.