Boost for inflation-linked ETFs

Higher income and expectations of rise in consumer spending in the US are right on cue with Fed inflation target, report CORDELL EDDINGS and DANIEL KRUGER

[NEW YORK] THE Federal Reserve's attempt to lift inflation to a level that would reflect a healthier US economy is starting to have a definite effect on 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, Bloomberg data show. Inflation expectations over the next five years surpassed 2 per cent to reach the highest level since May after a government report showed hourly earnings among US workers jumped more on average in February than economists forecast.

The shift in bond-market perceptions shows that some investors now expect consumer demand in the world's largest economy...

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