Inflation Protection ETF’s Are Exploding (TIP)

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August 11, 2009 11:02am ETF BASIC NEWS NYSE:TIP

explosion“Matt Tucker, head of U.S. fixed-income investment strategy at iShares said assets and trading volume in the high-yield ETF have “exploded” in the past year. It currently holds nearly $4 billion


 in its coffers and is yielding about 10%, according to Barclays. Bond yields and prices move in opposite directions,” John Spence from the WSJ Reports.

“The market has repriced credit risk since the panic at the end of 2008. As the economy recovers, corporate default expectations fall back,” Mr. Tucker said.

“Investors also have been plowing into ETFs indexed to Treasury Inflation-Protected Securities, or TIPS, on fears that loose monetary policy and unprecedented government spending will ultimately push up inflation. Assets in iShares Barclays TIPS Bond Fund (TIP) have nearly doubled in 2009 to $14.7 billion. And the fund was up 3% so far this year through Aug. 6, according to Morningstar,” Spence Reports.

“Investors are looking for some way to protect against inflation,” Mr. Tucker said. “ETFs provide pure, diversified exposure to the TIPS market.”

The investment (TIP) seeks results that correspond generally to the price and yield performance of the inflation-protected sector of the United States Treasury market as defined by the Barclays Capital U.S. TIPS index. The fund invests at least 90% of the assets in the inflation-protected bonds of its underlying index and at least 95% if the assets in U.S. government bonds. It may also invest up to 10% of assets in U.S. government bonds not included in the underlying index. The fund invests up to 5% of assets in repurchase agreements collateralized by U.S. government obligations and in cash and cash equivalents.

Full Story: HERE

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