Here’s why the iShares TIPS Bond ETF (TIP) inflows are rising

The iShares TIPS Bond (TIP) ETF has bounced back in the past few days as concerns about US inflation jumped. After falling to $101.67 (March 2020 low ) last week, it has rebounded by almost 2%. It remains 5% below the year-to-date high.

TIP’s rebound happened as the ETF recorded inflows this month. Data by ETF.com shows that inflows to the fund have jumped by over $300 million this month, bringing the total assets to over $20.8 billion.

TIP saw outflows in August and September. In all, it has lost over $1.6 billion this year since inflation has dropped to 3.6%. 

The current rebound of inflows happened after last week’s US inflation data. According to the Bureau of Labor Statistics (BLS), the headline and core inflation dropped to 3.6% and 4.6% on a YoY basis. The two, nonetheless, rose on a MoM basis as the price of gasoline jumped.

Meanwhile, America’s inflation expectations shot up in September as consumers remain worried about energy prices. Further, key parts of the CPI report like housing have been quite hot in the past few months.

While gasoline prices have eased a bit recently, the ongoing Israel and Hamas war could lead to higher oil prices. These fears will be more emphasized if the war expands, drawing countries like Iran.

The iShares TIPS Bond ETF (TIP) is a fund that is built to track TIPs, which are government bonds whose value rises with inflation. The TIP ETF has dropped in the past few months as inflation dropped from the pandemic high of peak of almost 10%.

The next key catalyst for the TIP ETF will be the ongoing war in Israel and its impact on the energy sector. It will also react to the prices of crude oil, which have been rising in the past few months. Brent has soared to $90.9 while West Texas Intermediate (WTI) has jumped to $86.5.