Record inflows for US inflation-linked bond ETFs

Added 20th March 2017

US inflation-linked bond ETFs saw record inflows in February, according to Lipper data. European investors are taking advantage of break-even inflation rates that are lower than they probably should be.

Record inflows for US inflation-linked bond ETFs

USD inflation-linked bond ETFs received €900m (£779.36m, $966.3m) in net inflows last month, and were the second most popular ETF investment after global equities, which saw €1.5bn in net inflows.

The inflows into TIPS (Treasury Inflation Protected Securities) ETFs were the biggest ever recorded in a calendar month, and are higher than all the inflows of the previous five months combined.

Investors are clearly anticipating an acceleration of inflation expectations in the United States. US 10-year break-even inflation is currently around 2%.

This is suspiciously low, considering consumer price inflation now stands at 2.7%. Add to that the presumed inflationary impact of the Trump presidency, and TIPS are a close to a no-brainer compared to nominal US government bonds.

TIPS also look attractive compared to European investment-grade bonds, which will struggle to even provide real returns over the next few years. The spread between US and German government bonds currently is more than 200 basis points.

Little surprise therefore that European investment-grade bond trackers were sold off in February. EUR corporate bond ETFs suffered the largest net outflows, at €1.3bn.

Visitor's Comments Add your comment

Add Your Comment

We won't publish your address

About Author

Tjibbe Hoekstra

Senior Reporter

Tjibbe joined Expert Investor as a senior reporter in March 2014. Before moving to London he worked as a financial news reporter for various news outlets in Amsterdam, including Reuters and ANP, the main news agency in the Netherlands. He also worked for Fondsnieuws, a website and magazine for finance professionals in the Netherlands. Tjibbe holds a MSc in Public Administration and a post-graduate diploma in Journalism.

Features

Emerging market growth funds make a comeback

Emerging market growth funds make a comebackLock icon

Emerging markets are increasingly attractive but selecting the right fund is the key to performance, according to Morningstar.

Analysis

Profiles

Directories

Canada Life International Limited
Canada Life International...

Canada Life International Canada Life House,...

Tweets

Events

IA International Fund Links Forum 2017
IA International Fund Links Forum 2017

Thursday 14 September

The Langham, London

IA Future Advisory Forum Europe 2017
IA Future Advisory Forum Europe 2017

Thursday 28 September
The Waldorf Hilton, London

IA Best Practice Adviser Awards Europe 2017
IA Best Practice Adviser Awards Europe 2017

Thursday 28 September
The Waldorf Hilton, London

IA Best Practice Adviser Awards South Africa 2017
IA Best Practice Adviser Awards South Africa 2017

Thursday 5 October
The Vineyard Hotel, Cape Town

Sponsored Content

Investment Strategy

OTHER STORIES FROM LAST WORD...