Investors poured almost $500M into BlackRock's $22B iShares TIPS Bond ETF (TIP), which tracks inflation-protected securities, on Tuesday, according to Bloomberg data.
That represents the ETF's biggest inflow since April 2015 and comes after the Fed unexpectedly cut monetary policy in an effort to offset the economic impact of the coronavirus.
Inflation expectations tend to rise after the Fed reduces rates, but bond-market activity shows that traders aren't so sure.
"It's a case of short-term versus long-term prospects being different," Thomas Simons, senior money market economist at Jefferies, explains. "The Fed's easing should make for a situation where growth and inflation accelerate quickly once the virus fears abate."