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Bridge over ocean
1 November 2010 Financial Analysts Journal Volume 66, Issue 6

TIPS, Inflation Expectations, and the Financial Crisis

  1. Aleksandar Andonov
  2. Florian Bardong
  3. Thorsten Lehnert

The authors show that inefficiencies in the U.S. market for inflation-linked bonds can be exploited by informed traders who include survey estimates or inflation model forecasts in trades on breakeven inflation. The Treasury Inflation-Protected Securities market has yet to fulfill investors’ expectations as a low-risk, efficient, and liquid financial instrument.

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