Treasury bond traders are telling Americans to stop worrying about inflation. Consumers expect prices to rise 5.2% in the next 12 months, according to a monthly survey by the University of Michigan, the most pessimistic they've been since 1982. Treasury Inflation Protected Securities, or TIPS, show traders anticipate inflation of about 2.9% by January, in line with its average of 3.1% the last 20 years. While consumers grapple with rising prices of gasoline and other commodities, TIPS say the commodities market is a bubble about to burst. Crude oil has doubled in the past 12 months and the Reuters/Jefferies CRB Index of 19 commodities has surged 31% in the 12 months ended April 30. Yet in the same period, consumer prices rose by 3.9%, the slowest pace since October, the Labor Department said May 14.

“The consumers are more right” than TIPS traders, said James Evans, who manages $4 billion of inflation-linked bonds at Brown Brothers Harriman & Co. in New York. “TIPS breakevens have continuously underestimated inflation.” Evans has been buying TIPS maturing in three to five years. Regular Treasuries are also pointing to a slowdown in price gains. In the last six months, yields on 10-year notes traded below the inflation rate for the first time since 1980. Over the past two decades, yields averaged 2.87%age points more than inflation.