expect (my emphasis):
At a time when savers complain that they are earning almost no interest from their bank accounts, some investors on Monday bought United States government bonds that effectively had a negative rate of return.
Bizarre as it sounds, that is correct. In an auction of a special kind of five-year Treasury bond, investors paid $105.50 for every $100 of bonds the government sold — agreeing to pay the government for the privilege of lending it money.
The reason is that these types of bonds offer a guaranteed protection against inflation. So, if inflation soars — as some economists worry might happen, with the government seeking to give the economy a boost by flooding it with money — the value of the bonds would go up accordingly.
The investors who took part in the $10 billion auction are betting that inflation, now at about 1 percent annually, will rise to a level that more than compensates for the premium they paid.
Inflation-protected Treasury securities have already been trading at negative yields on the open market for some time, as professional and institutional investors have sought to hedge their portfolios against the risk of inflation. But Monday was the first time since the government began selling these so-called Treasury Inflation-Protected Securities in the 1990s that new ones were sold at a negative yield.
Buyers “believe we have reached the bottom of the inflation cycle and the next move is higher, not lower,” said Kevin H. Giddis, the executive managing director and president for fixed-income capital markets at Morgan Keegan & Company.