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16 May 2019

US Inflation-sensitive Bonds Performance report – Q1 2019

US CPI data were pretty much unchanged between October and December 2018(1). While the index was supported by stronger food inflation in December, the 30%+ sell off in oil prices we saw in the latter part of the year was a drag. The pickup in core goods prices over the period was largely a function of a change of methodology in calculating used vehicle prices, which resulted in increases in October and November. Real yields compressed further across maturities over Q1 2019 as the Fed turned more dovish. There was also good demand for TIPS over the period and increased supply ($32bn in total) did not harm market pricing.