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Bonds: Sorting Through the Confusion

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Michael Pond, fixed-income strategist for inflation-linked assets at Barclays Capital (BCS), also expects inflation to decelerate this year, but he says TIPS will continue to offer more value than other government bonds that aren't adjusted for inflation. He says five- and 10-year TIPS are fairly valued, while one-year TIPS are undervalued. The market is pricing in a 0.8% rise in consumer prices in 2010, vs. Barclays' forecast for a 1.7% increase and a 1.1% gain in the core inflation rate, which doesn't include food and energy price hikes.

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