Shorting Canadian Bonds, our first signs of rising inflation

Daniel Weston

Aimed Capital

We have been long 10 year government bonds since the inception of the Aimed Global Alpha portfolio in late 2013. This was a result of weakening inflation signals in all of the countries of the bond markets we focus on. Today we have our first rising inflation signal coming out of Canada. Bonds do not like rising inflation, as inflation eats away the purchasing power of a bond's future cash flows. Therefore bond prices fall while interest rates rise as investors demand higher yield to compensate for higher inflation. So, in expectation of inflation rising further in Canada, given what is coming through our data, we have shorted the Canadian 10 year bond accordingly to hedge inflation risks. In the chart below, our methods of calculating our Canadian inflation leading indicator has crossed above our inflation forecasts for the coming quarters, signalling a rising trend to inflation which has triggered our short bond trade. Read more... (VIEW LINK)


Daniel Weston
Chief Investment Officer
Aimed Capital

Running the Aimed Global Alpha - Macro Hedge Fund. Aussie. Trader. Investor. Coder. Cricketer. Skier. Surfer. Flyer. www.aimedcapital.com

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