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Inflation Expectations

Growing demand for ETFs that hold inflation-protected Treasuries may indicate that bond buyers expect inflation to pick up soon.

By Cordell Eddings and Daniel Kruger, Bloomberg | Updated on March 17, 2014

The Federal Reserve’s attempt to lift inflation to a level that would reflect a healthier U.S. economy is starting to take hold in the bond market.

For the first time in 19 months, investors are stepping up their buying of exchange-traded funds (ETFs) that hold Treasuries tied to cost-of-living increases, data compiled by Bloomberg show. At the same time, inflation expectations over the next five years surpassed 2 percent to reach the highest level since May after a government report showed hourly earnings among U.S. workers jumped more on average in February than economists forecast.

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