Inflation-indexed bonds "will become a major asset class worldwide" and "all institutional investors will end up with an allocation" to them, according to Dan Bernstein, director of research at Bridgewater Associates. The global market for inflation-indexed bonds, now at $310 billion, will grow by some $45 billion a year, including $25 billion in TIPS in the United States, he said in an interview.
"Investors that act sooner are more likely to see a price advantage, over those that act later," Mr. Bernstein wrote in a report. The large U.S. budget deficits have further convinced investors that "TIPS are here to stay," the report says.
