Trying to get my head around inflation linked gilts
If my view is that inflation is going to drop significantly over the next 2 years - let’s say back to the BOE 2% target
I’ve been told to buy long duration investment linked gilts…
It sounds counter intuitive as you would usually buy IL gilts to protect against inflation rising right?
But this wouldn’t be to buy and hold until maturity, but to buy and sell over a 2 year investment horizon.
Because as inflation drops, the coupon paid on the IL bonds drop which causes the cash price to increase.
Does this sound too simple? I’m sure it’s more complicated than that. I am reading the material on the DMO site but thought I would post here for any help.
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