BOE Inflation Threat Means Linker Returns Top Italy: U.K. Credit

As Mark Carney prepares to take charge of the Bank of England, U.K. inflation expectations are close to a two-year high with policy makers focusing on growth even if it means letting consumer-price gains accelerate.

British bonds with returns tied to the rate of inflation have gained the most among 18 nations that sell so-called linkers, according to Bank of America Merrill Lynch data. The U.K. breakeven rate, or the difference between yields on indexed and non-linked debt, rose to 3.27 percentage points from 2.67 points at the start of the year. Relative to the U.S., inflation expectations are near the highest level since January 2012 and the returns were even higher than on Italy’s securities.