‘TIP’ Posts 1st Monthly Outflow Since June

February 09, 2022

Investors ditched the iShares TIPS Bond ETF (TIP) to the tune of more than $2 billion in January, marking the first major outflow for one of the most crowded trades against decades-high inflation in the second half of 2021.

The largest ETF dedicated to following inflation-protected Treasury bonds saw just over $1.1 billion in outflows on Jan. 31, doubling the month’s prior outflows on the last day of the month to a total outflow of nearly $2.2 billion.

The last time the fund posted any monthly outflow was June 2021, when it recorded a mild $140 million in outflows, according to FactSet data.

 

 

Inflation-protected Treasury bonds are securities that are adjusted for par value based on the Consumer Price Index, while their interest rate remains fixed until maturity. Demand for those bonds heated up in May after the CPI hit 5% year-over-year and continued to soar during the latter half of 2021, with TIP taking in $12 billion in net assets over the year.

Rotating Into Other TIPs ETFs

A prime reason for the outflows of TIP is because of its relatively high duration of 7.6 years, making it more likely to lose value at a time when the Federal Reserve is expected to hike interest rates multiple times through 2022, and with Fed Chairman Jay Powell in his last press conference not ruling out a 50 basis point hike.

That benefits shorter-duration TIPS funds like the iShares 0-5 Year TIPS Bond ETF (STIP), the Invesco PureBeta 0-5 Yr U.S. TIPS ETF (PBTP), the PIMCO 1-5 Year US TIPS Index ETF (STPZ) and the Vanguard Short-Term Inflation-Protected Securities ETF (VTIP). The four funds have durations below 3 and have taken in a combined $1.1 billion in assets year-to-date.

 

Ticker Fund Name Effective Duration (Years) YTD Flows
TIP iShares TIPS Bond ETF 7.6 -2421859670
SCHP Schwab US TIPS ETF 7.6 -10711500
SPIP SPDR Portfolio TIPS ETF 8.2 -56286487.9
TIPZ PIMCO Broad US TIPS Index ETF 8.2 19287000
GTIP Goldman Sachs Access Inflation Protected USD Bond ETF 7.5 4311500
STIP iShares 0-5 Year TIPS Bond ETF 2.4 588937790
PBTP Invesco PureBeta 0-5 Yr US TIPS ETF 2.4 4982820
STPZ PIMCO 1-5 Year US TIPS Index ETF 2.9 82585000
VTIP Vanguard Short-Term Inflation-Protected Securities ETF 2.5 389525834.4
LTPZ PIMCO 15+ Year US TIPS Index ETF 20.7 -145449000

Data as of 2/4/2022

 

Contact Dan Mika at [email protected], and follow him on Twitter

 

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