A $2 trillion market for securities linked to U.S. inflation data could be the first area of Treasuries that would crack if the Bureau of Labor Statistics is politicized, according to bond investors.

After President Donald Trump fired BLS chief Erika McEntarfer on Friday following a weak jobs report and said the figures were “rigged,” investors have fretted that the move could erode trust in government data, which has a major effect on asset prices.

That link is perhaps most acute in Treasury inflation-protected securities, where the face value of a bond is adjusted based on the consumer price index, which is calculated by the BLS. Interest payments are based on that floating principal.

“If there is politicization of the BLS, and somehow the data is not credible it poses an enormous risk over time to the Tips market,” said Amar Reganti, fixed income strategist at Hartford Funds.

That concern was echoed by Michael Feroli, chief U.S. economist at JPMorgan Chase & Co.

“The $2.1 trillion market for TIPS is built on a foundation of trust in the construction of the CPI data,” Feroli wrote in a Sunday note.

“The integrity of this data is at least as important as the employment data,” Feroli said. “Here, even seemingly innocuous technical changes can matter.” For example, calculating CPI with a method used by the European Union “would shave about 20 basis points off annual inflation,” he said.

U.S. price growth is in the spotlight, with a July CPI report due next week and economists expecting both annual headline and core readings to remain above the Fed’s 2% target.

While Trump has persistently called for the Federal Reserve to cut interest rates, there are signs his tariffs are pushing up prices across the U.S. economy. Still, more investors are betting on a rate cut as soon as next month after last week’s data pointed to weakness in the labor market. On Friday, short-term Treasury yields posted their biggest drop since late 2023.

TIPS on the rise

Price growth has been sticky for much of the past year, which has bolstered the performance of TIPS. The Bloomberg U.S. Treasury inflation-linked bond index has gained 5.7% in 2025, and is on course for its best year since 2021.

Inflation-protected Treasuries account for about 7% of the total debt. Given the scale of outstanding U.S. government debt that requires financing, the recent Treasury refunding statement flagged an increase in the sale of some TIPS.

“The Treasury department is going to need to use all of its tools in order to execute its job, particularly after the passage of the One Big Beautiful Bill,” said Reganti.

“An enormous amount of trust from the Treasury market has been installed in the secretary and the department. It would never give that type of leeway to a private sector issuer.”

(With assistance from Elizabeth Stanton and Greg Ritchie.)

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