The Federal Reserve's attempt to lift inflation to a level thatwould reflect a healthier U.S. economy is starting to take hold inthe bond market.

For the first time in 19 months, investors are stepping up theirbuying of exchange-traded funds (ETFs) that hold Treasuries tied tocost-of-living increases, data compiled by Bloomberg show. At thesame time, inflation expectations over the next five yearssurpassed 2 percent to reach the highest level since May after agovernment report showed hourly earnings among U.S. workers jumpedmore on average in February than economists forecast.

The shift in bond-market perceptions shows that some investorsnow anticipate consumer demand in the world's largest economy willbe strong enough to push inflation toward the Fed's elusive 2percent target. Last year, investors were so convinced thepersistent lack of price pressure had become entrenched thatTreasury Inflation Protected Securities, or TIPS, posted theirworst losses since they were introduced in 1997.