"Out here, power bills are up big-time," he said.
Rising health-care and housing costs may also encourage more individual investors and money managers to seek bonds that aren't vulnerable to inflation.
One aspect that may make TIPS harder to assess is a lower coupon, or specified interest rate. The eight inflation-indexed issues' coupons range from 3 3/8 percent to 4 1/4 percent, versus 4 percent to 5 3/8 for current non-indexed Treasuries.
Yields, calculated using the coupon and any difference between a bond's current price and face amount, are also lower on TIPS, until inflation is factored in. For example, 10-year TIPS yield 3.29 percent versus 5.5 percent for non-indexed Treasuries.
Factoring in inflation, TIPS yield about 6.5 percent.
As long as inflation is more than the difference between the yields on the two types of securities, it's probably a good time to buy TIPS, analysts say. The latest CPI report showed the government index rose 3.3 percent in the year ended last month.
That's more than the 2 percentage point gap in yield between non- indexed Treasury yields and comparable indexed securities.
``Above all else, today I'd pick TIPS,'' said John Hollyer, who runs Vanguard's US$300 million Inflation-Protected Securities Fund. The fund has generated a 6 percent return this year.
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