Inflation-protected treasuries continue to outperform standard treasuries

The best way to gauge long-term inflation expectations is by comparing the price of Treasury inflation-protected bonds to the price of inflation-unadjusted treasuries. A simple way to do this is by comparing the price of TIP (iShares Barclays TIPS Bond Fund) to TLT (iShares Lehman 20+ Year Treasury Bond Fund). Since the beginning of October 2009, the ratio of the TIP price to the TLT price has been rising, meaning that TIP has been outperfoming TLT. (See chart below.) In other words, inflationary expectations have been increasing during the past 10 weeks.

rising ratio means inflationary expectations are increasing

TIP has outperformed TLT since ealry October


One Comment on “Inflation-protected treasuries continue to outperform standard treasuries”

  1. […] that TIPS were signaling relatively high levels of inflation and were far out-performing Treasurys (see here for example). In late January, TIPS imputed an inflation expectation above 3% over the next 5-10 years. […]

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