TIPS Make Fresh 52-Week HighsPosted: October 20, 2009
The iShares Barclays TIPS (Treasury Inflation-Protected Securities) Bond Fund (TIP) made its biggest one-day gain today (0.64%) since the end of June. TIP is now at a fresh 52-week high and is reaching for levels last seen in September, 2008.
As evidence of simmering inflation appears in various corners of the economy (as chronicled here on Inflation Watch), it seems that investors are getting more and more active in protecting their portfolios. TIPS are designed to deliver inflation-adjusted yields on Treasuries and as such can serve as a proxy for investor’s inflation expectations. The Federal Reserve continues to study how accurately TIPS measure inflation expectations, but the direction is clearly, slowly but surely, pointing upward.
Full disclosure: long TIP
Addendum from writejesse: It’s not only that TIPS is hitting fresh highs, but that it is doing so while standard long bonds are falling. TIPS is up 5 percent year to date, while iShares Barclays 20+ Year Treasury Bond ETF (TLT) is down 19 percent year to date. The divergence in the performance of these two ETFs is conclusive evidence of rising inflationary expectations.