The iShares Barclays TIPS Bond Fund (NYSEArca: TIP), which currently has a negative yield, saw nearly $500 million move out the door on Monday to lead all daily ETF outflows.

The Treasury Inflation Protected Securities fund logged net outflows of $471.4 million on Feb. 4, or about 2.1% of the ETF’s total assets, according to IndexUniverse data.

TIP has a negative 30-day SEC yield of -4.67%, according to manager BlackRock (NYSE: BLK). The fund holds $22.1 billion in assets.

“How can this be? And why would investors accept a negative yield? The answer is that the yield on a TIPS bond is equal to the Treasury bond yield minus the rate of expected inflation,” writes Thomas Kenny at Bonds. “As a result, when standard Treasury bonds are trading at yields that are below the expected inflation rate – as has been the case since late 2010 – TIPS yields will fall into negative territory.”

“Would you buy an investment that was guaranteed to lose money? That is the situation investors are embracing today in the market [for TIPS],” writes Brett Arends at

“FRC, a Boston firm that tracks the mutual-fund industry, says U.S. investors own at least $145 billion worth of TIPS through funds that specialize in them. The amount of TIPS in circulation has risen 50% in five years to $850 billion, according to the U.S. Treasury,” Arends notes.

The government has been selling TIPS with negative yields for years now. Investors buying bonds with negative yields illustrates the premium investors are willing to pay for inflation protection. It also highlights how low Treasury yields are now. [Why TIPS ETFs Have Negative Yields]

TIPS bubble?

“To adjust for inflation, a TIPS’ principal goes up or down with the Consumer Price Index, which is an indicator of inflation,” Morningstar analyst Abby Woodham writes in a profile of the BlackRock ETF.

“When the CPI goes up, the TIPS’ principal is adjusted up accordingly. Even though the interest rate on the bond remains the same, the semiannual coupon is paid based on the adjusted principal,” she adds. “Through this process, a TIPS’ principal and interest payments are protected against inflation as measured by the CPI.”