Vanguard warns investors need to remember TIPS possess interest rate risk. “Given today’s low or even negative real yields and relatively high interest rate sensitivity, TIPS investors face risks that should be carefully evaluated,” it says.
So, TIPS ETFs can be hurt by rising Treasury yields. “Like conventional Treasury bonds, TIPS can decline in value over any short-term period. In other words, investors should not view a TIPS portfolio as a risk-free inflation hedge,” according to Vanguard. [TIPS ETFs: Inflation Protection Still Has Risks]
The iShares Barclays TIPS Bond Fund actually has a negative 30-day SEC yield of -0.83%, according to manager BlackRock.
The demand for TIPS has been so strong this year that investors have bought 5-year bonds even though they had negative yields. [TIPS ETFs Rise After Bonds Sell at Record Negative Yield]
iShares Barclays TIPS Bond Fund
Full disclosure: Tom Lydon’s clients own TIP and SPY.