Fear of QE3 impact drives demand for inflation-proof bonds

Fear of United States QE3 inflation drove high demand for the government’s first round of inflation-proof bonds.

Treasury’s debt management office held its first auction of the bonds this afternoon and got much higher demand than anticipated.

The government initially proposed an issue of $1 billion in its budget earlier this year but lifted that to $2.5 billion after market participants showed more interest than expected.

Even then there was heavy over-subscribing, with bids of more than $4 billion in the first tender this afternoon for the 2% coupon bonds.

 

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