Inflation fears mount

April 12, 2007
Inflation fears mount

Bond market expectations of future inflation have risen to their highest level in seven months, boosting demand for Treasuries that protect investors against increases in consumer prices.

Investors will get a chance to buy $6bn in 10-year inflation-linked Treasury bonds, known as Tips, at an auction on Thursday, and strong demand is expected, particularly as investors originally expected a sale of about $8bn.

"We are nervous about inflation," said David Ader, bond strategist at RBS Greenwich Capital. He said the smaller auction and the seasonal tendency for inflation to rise in March supported demand for Tips.