Question

If expected inflation increases, what will happen (other things equal) to the value of a 30 year US Treasury Bond?

Answer 1

If the expected inflation increases, the interest rate for the longer term bonds will increase and hence, the value of 30 year US Treasury bond will decrease.

Inflation is one of the important factor that determines the interest rate. If the inflation rate increases, the monetary policy will try and bring down the liquidity by increasing the interest rate.

Now as the interest rate for the future is expected to be higher, the currently traded bonds become less attractive for lower coupon payment, hence, the value of long term bonds will decrease