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Why productivity matters

Chris Dillow

Chris Dillow
Why productivity matters

Why are index-linked gilt yields so low - even negative for longer maturities? One good reason is simple maths. A combination of the global savings glut and shortage of safe assets, quantitative easing (QE) and investors' risk aversion are keeping nominal gilt yields low - if not as low as a few weeks ago - while inflation expectations haven't fallen so far, in part because of QE. Because index-linked yields are equal to nominal yields minus the breakeven inflation rate, it follows that they must be low.

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