TIPS Show Inflation Alarm Fading as Options Give Fed Time
This article is for subscribers only.
Bill Gross, who runs the world’s biggest bond fund, says the Federal Reserve’s open-ended plan to flood the economy with $40 billion a month will ignite inflation. The options market is signaling that won’t happen anytime soon.
Demand to protect against higher long-term bond yields over the next six months has been static since Fed Chairman Ben S. Bernanke announced a third round of quantitative easing, or QE3, Sept. 13, Barclays Plc data shows. Appetite, though, is rising for options that mature in 2015. Traders’ expectations for consumer price increases as measured by inflation-protected Treasuries have fallen from the highest levels since 2006.