One thing to keep in mind is that an increase in the rate of inflation has already been priced
into nominal bonds.
Not exact matches
So your negative yielding
bonds become more expensive as the
nominal interest rates dives deeply
into the negative territory.
And expectations of higher rates of inflation are being priced more aggressively
into longer - term
nominal bonds.
It is worth noting that although net foreign flows
into government
bonds have been muted, investors rotated out of both
nominal and real rates, adding to bills (Chart pack available on request) and keeping exposure to Mexican pesos.