“Investors’ appetites for an exchange-traded fund that provides exposure to bonds whose principal and coupon payments are adjusted for inflation have soared in recent sessions. Weekly inflows into the iShares Treasury Inflation Protected Securities Bond ETF (TIP) reached their highest level on record as investors brace for the possibility of a sustained upturn in price pressures,” reports Luke Kawa for Bloomberg.[related_stories]
Investors will typically look at TIPS ahead of an inflationary period since buying TIPS after inflation has gone up means that the security has already priced in the inflation and investors would likely be overpaying for the TIPS exposure.
Potential investors should also be aware that TIPS are generally more volatile than traditional nominal Treasuries due to the inflation adjustments to their principal value.
Still, investors continue piling into ETFs like TIP.
“Cumulative weekly inflows are more than $972 million, the highest of any U.S. fixed income ETF over this period. TIP has seen trading volumes north of 4.75 million and 6 million over the past two sessions, compared with a 15-session average of 1.7 million shares,” according to Bloomberg.
For more information on Treasury inflation protected securities, visit our TIPS category.
iShares TIPS Bond ETF