SINGAPORE (BLOOMBERG) - BlackRock joined Pacific Investment Management Co (Pimco) in recommending inflation-linked bonds and warning costs are poised to pick up.
"Stabilizing oil prices and a tighter labor market could contribute to rising actual, and expected, US inflation," Richard Turnill, BlackRock's global chief investment strategist, wrote on Monday on the company's website. "We like inflation-linked bonds and gold as diversifiers."
New York-based BlackRock manages US$4.6 trillion.
Federal Reserve chair Janet Yellen will get a chance to give her views in a speech on Tuesday at 11:20pm Singapore time in New York. Pimco's Mihir Worah, one of the investors for the US$87.8 billion Total Return Fund, has been telling investors this year that inflation is poised to accelerate. Fed officials Stanley Fischer and James Bullard chimed in this month to note costs are picking up.
Treasury market inflation expectations and oil prices have both risen from their lows for the year set in February. A government report April 1 will show US employers added 210,000 jobs in March, after hiring 242,000 in February, based on a Bloomberg survey of economists.
The difference between yields on 10-year notes and similar- maturity Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices, has increased to 1.56 percentage points from as low as 1.12 on Feb 11. It's still below its average of 2.08 for the past decade.
The Fed's preferred inflation gauge rose 1 per cent in February, a report showed on Monday, half of the central bank's target of 2 per cent.
"We like Treasury Inflation Protected Securities," MrWorah said in a video on the Pimco website this month. " The market is pricing 1 per cent inflation in the United States for next year. We think it's likely to be closer to 2 per cent."