Wells Fargo strategists Boris..........>

US TSYS/TIPS: Wells Fargo strategists Boris Rjavinski and Zachary Griffiths eyed

"how to profit from inflation surprises in 2018" with TIPS. 

- They noted TIPS investors "may have already forgotten the surprise downturn in

inflation that occurred in March of this year, but we have not. A 7.0% decline

in wireless phone services was enough to send core inflation to the lowest

monthly reading since the Reagan administration." They cited how clients could

"profit from potential CPI surprises in 2018" but noted "all developments

discussed below are NOT part of our current baseline. All figures are on y/y

basis:" 

- They said that "an unseasonably cold winter, a la 2013-2014, could push energy

services higher. This could add 0.2-0.3% upside to the CPI over a short run.

Investors could profit from this via front-end TIPS." 

- And a "spike in the 'food away from home' due to higher labor costs could

linger several months adding 0.25%-0.5% to CPI," they said. "We would see this

as more of a cyclical adjustment in headline inflation, and not a structural

change in core. Look to front-end TIPS/breakevens to capture this move." (More)