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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.
Inflation remained at the Federal Reserve’s target in April for a second straight month, signalling firming prices in the U.S. economy, the Wall Street Journal reported. Personal-consumption expenditures price index, a broad measure that serves as the Fed’s preferred inflation gauge, inched up a seasonally adjusted 0.2% in April from March. The index was up 2% year-over-year, matching the Fed’s annual inflation target.
For more information on Treasury inflation protected securities, visit our TIPS category.