However, rising inflation expectations have weighed on the bond market, with yields on benchmark 10-year Treasuries back up to 2.12%. Observers believe rising inflation would weigh on real yields, which diminishes the attractiveness of debt assets.
SEE MORE: TIPS ETFs May Be Better Alternative to Treasuries
Changes in inflation expectations can cause increased trading activity as investors adjust to a new break-even rate – the yield difference between nominal Treasury bonds and TIPS of the same maturity, and cause swings in TIP prices.
Standish Mellon “expects TIPS to continue to hold up a lot better than Treasuries as Trump administration policies like lower taxes, more infrastructure spending and less regulation are expected to lead to more inflation,” according to Barron’s.
For more information on the fixed-income market, visit our bond ETFs category.
iShares TIPS Bond ETF (NYSEArca: TIP)
