Dauntless, the US Federal Reserve has unveiled a third round of quantitative easing (QE), committing to buy $40 billion of mortgage-backed securities per month until the labor market turns around. The goal of QE3 is ostensibly to get more Americans back to work. But the immediate impact has been to inflame inflation expectations, especially since the first two rounds of QE have already larded the Fed’s balance sheet with Treasury and mortgage debt valued at $2.3 trillion.

Shortly after the Fed’s announcement, the spread between 10-year Treasuries and Treasury Inflation Protected Securities (TIPS) widened to 2.4 percent and was recently at 2.6 percent. This spread is known as the breakeven rate, and it is a good gauge of the market’s inflation expectations.

What is disconcerting is how quickly the spread widened, particularly since at a TIPS auction earlier this year the bonds were selling at a record-low, negative yield. There is clearly a disconnect between the market’s inflation expectations (2.6 percent recently) and what is reflected in the consumer price index (CPI), which is indicating annual inflation of around 1.7 percent.

The breakeven rate is likely to rise further from here, as many of the world’s central banks continue to maintain loose monetary policies, effectively encouraging inflation. As a result, TIPS have become an increasingly attractive fixed-income option for capturing capital gains while hedging a portfolio against a potential erosion in purchasing power. That’s especially true if you expect economic growth to remain fairly anemic over the next few years.

As the CPI rises and falls, the principal value of TIPS is adjusted accordingly. Not only do you enjoy rising principal values as the CPI climbs, the bonds’ coupon rate is paid on that higher value, thus producing a rising yield.

iShares Barclays TIPS Bond (NYS: TIP) effectively tracks the universe of all TIPS issued with at least one year to maturity and $250 million in par-value issuance. Currently holding about 35 individual issues, the fund’s maturity range is essentially barbell-shaped, with the heaviest weightings in short-term and long-term maturities, resulting in an average maturity of 9.3 years.

One potential drawback is the fund’s fairly long duration (a measure of maturity that takes interest rates into account) of 8.3 years, meaning the fund would be extremely sensitive to any rise in interest rates. That’s not much of a concern for the next few years, since the Fed has pledged to hold rates at current levels into 2015.

Rather, the greatest risk now is the debt crisis in Europe. If the European Union were to suffer a sudden breakup, it could push the global economy into a deepening recession in which TIPS’ value could be adjusted downward. But that seems an unlikely prospect, especially now that the European Central Bank has pledged to step in to keep yields from spiraling upward on troubled sovereign debt.

For now, iShares Barclays TIPS Fund seems like a prudent way to protect against future inflation while collecting an attractive 2.2 percent yield.