Traders Now Worried About U.S. Inflation

Three months ago, bond traders were bracing for deflation in the U.S.  Now, they’re starting to worry about inflation — and snapping up a record share of Treasuries that offer some protection.

So what’s changed? Part of the answer, of course, has to do with oil, which arrested what seemed like an unrelenting slide that pushed prices from more than $100 a barrel to less than $50 in a span of five months.

But perhaps just as important is the bond market’s changing perception of the Federal Reserve. Instead of worrying about how the Fed’s zeal to roll back its policy of holding interest rates near zero might choke off growth, bond traders are now confident the central bank will let the economy regain the momentum it lost with oil’s plunge before raising borrowing costs.