So, why would you pay a price for a 5-yr. TIPS bond which starts you out with a negative yield? Those who have suggested that a negative yield implies that the market is forecasting deflation are wrong. The way a TIPS return is calculated, in the event that the CPI were to go negative, the principal amount of your investment would decline. Who would invest in that? I guess Dennis Gartman might.
The only reason I can think of that a sophisticated investor would buy into an inflation-adjusted investment at an initial price which yields a negative return is because the investor believes that there will be substantial positive principal adjustments between now and the maturity of the bond 5 years later. In other words, the investor believes that even the fraudulent Government-calculated CPI will have to reflect much higher levels of inflation in the near future. There can be no other rational explanation. Hell, even Warren Buffet is now warning about inflation, so the smart money must see something that monkeys on CNBC and in the mainstream financial advisory/money management business can not.
Those of us who understand that the Fed/Govt is inextricably painted into an inflate or collapse corner also understand that today's asset deflation (mainly housing and banks) will lead to Bernanke's attempt inflate/hyperinflate the money supply to fight this deflation. Otherwise his famous speech in 2002 was a complete lie. While Treasury bonds may seem like a relatively safe-haven right now, the only way to protect yourself from the impending credit crisis part deux and concomitant acceleration in inflation is to load up on physical gold and silver.