There’s no question that bonds are having a rough year, and Treasury inflation-protected securities (TIPS) aren’t immune to the sell-offs.
That doesn’t mean that fixed income investors looking for a safe haven amid rampant inflation should avoid them completely. They still provide a much-needed cushion in the current market environment, especially when the Federal Reserve is expected to continue its rate-hiking measures to keep inflation in check.
“It has been a volatile start to the year for inflation-protected bond funds, and while most are posting losses, they’ve still proven to be a haven for bond investors,” a Morningstar article by Katherine Lynch notes.
“Heading into 2022, funds focused on Treasury Inflation-Protected Securities–or TIPS–were top performers as worries about inflation surged,” Lynch added. “Then as the Federal Reserve shifted into inflation fighting mode, those fears began to fade, cooling TIPS fund performance.
2 New Ways to Play the Moves
With the volatility in TIPS, Direxion Investments has a pair of leveraged exchange traded funds (ETFs) to play the moves. For traders erring on the side of bullishness, there’s the Direxion Daily TIPS Bull 2X Shares (TIPL), and for bearishness, there’s the Direxion Daily TIPS Bear 2X Shares (TIPD).
Both ETFs seek to achieve 200%, or 200% of the inverse, of the daily performance of the Solactive TIPS ETF Index, which provides exposure to inflation-protected U.S Treasury bonds, commonly known as “TIPS,” according to a statement from the firm.
“Following decades when inflation was all but non-existent, the prices of everything from cars to computers have jumped in recent months,” said David Mazza, managing director, head of product at Direxion. “TIPL and TIPD allow traders to take amplified bullish or bearish positions on the US TIPS market.”
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