Inflation fears rise as US issues first negative yield treasury

Inflation fears appear to be rising in the US after the Treasury issued its first ever negative yield government bond.

The US Treasury yesterday issued $10bn of Treasury Inflation Protected Securities, or Tips, for a yield of minus 0.55%. Institutional investors snapped up 39% of the bond sale, up from the recent average of 30%, highlighting the escalating fears of inflation for some investors. But while the Tips yield was negative, demand for low yielding nominal bonds also remains strong. "This negative yield shows many investors are concerned about the ramifications of QE2," Ignis head of credit portfolio management Chris Bowie says. "Inflation fears did not really appear during the first rou...