Long-duration Treasuries may not protect portfolios if inflation rises above expectations, says T. Rowe Price CIO.

Sébastien Page, CIO at T. Rowe Price, warns that long-duration U.S. Treasuries might fail as inflation hedges if inflation exceeds market expectations, causing bond prices to fall. With inflation measures like core CPI and core PCE rising, traditional bonds priced for expected inflation could lose value if inflation surprises on the upside. Instead, Page recommends a diversified inflation hedge strategy using cash, TIPS (inflation-protected securities), commodities like energy and metals, and hedged equity strategies to better protect portfolios against inflation risks. This layered approach aims to provide multiple ways to benefit if inflation continues to surprise higher, rather than relying solely on bond duration.