Inflation-Protected Bonds Gain Appeal as 2025 Rate Hikes Loom
Fixed-income investors facing persistent inflationary pressures are increasingly turning to inflation-linked bonds (ILBs) to safeguard purchasing power. With global headline inflation projected at 4.4% for 2025—masking sharper rises in essential costs like rent (+7.0%) and medical care (+9.3%)—these instruments offer direct protection against real-world expense growth.
The 2025 market presents a unique challenge: ILBs now compete with traditional government bonds offering nominal yields NEAR 5%. This tension between inflation hedging and yield capture will define fixed-income strategies through the next rate cycle.