Don't be an id-IOTA part 2
An hidden gem among inflation-linked bonds
A few months ago I wrote a piece talking about a little-known indicator related to the world of inflation-linked stocks. I was talking about Iota, or the difference in the asset swap spread between an inflation-linked security and a nominal security.
You can find the piece at the following link, which I recommend reading:
Don't be an id-"iota"
In Italian (as many of you know I'm Italian) idiota means a person who doesn't understand much, while in the Greek alphabet, Iota means a small amount.
Now I would like to talk to you about a hidden opportunity in the fixed income world, and specifically, in the world of inflation-linked bonds.
We all know that the short part of the government bond curves has been trading tighter than the risk free rates offered by the ECB.
In the graph below, for example, you can see the spreads of European bills, which deal with almost all (Spain and Italy included) below the Estr rate (i.e. the risk free rate).
But precisely where the majority of investors and traders do not venture, that is where the most precious gems lurk..