Investors are hanging on to bonds that protect against inflation even as they sell other U.S. government debt, a sign many trust the Federal Reserve to hold interest rates steady even if the economy picks up steam.
In recent trading, the yield on the 10-year Treasury inflation-protected security was minus 1.047%, according to Tradeweb, compared with minus 1.032% on Tuesday.
The 10-year TIPS yield has climbed slightly from its record closing low of minus 1.115% set on Jan. 4 but not nearly as much as the yield on the regular 10-year Treasury note. That yield, a benchmark rate for borrowing costs throughout the economy, has jumped to 1.090% in recent trading from 0.915% on Jan. 4. Yields rise when bond prices fall.
Taken together, these moves suggest investors increasingly expect higher inflation, but not rate increases from the Fed, analysts said.
Over the past several months, market-based measures of investors’ inflation expectations have risen, based on the belief that a combination of coronavirus vaccines, increased government spending and continued support from the Fed will lead to a strong economic rebound this year.
