© Reuters. Buyers Withdraw from TIPS ETFs as US Inflation Slows Down
Quiver Quantitative – As inflation within the US exhibits indicators of easing, traders are more and more withdrawing their cash from exchange-traded funds (ETFs) specializing in inflation-protected bonds. In November alone, a major $400 million was withdrawn from key ETFs concentrating on Treasury Inflation-Protected Securities (TIPS), marking the biggest month-to-month outflow since January 2022. This shift comes amidst a broader bond market rally, with the Bloomberg US Treasury Index outperforming the Bloomberg TIPS Index, rising 3.5% towards the TIPS Index’s 2.7% acquire.
The motion away from TIPS ETFs aligns with current financial knowledge indicating a slowdown in inflation. The Private Consumption Expenditures (PCE) deflator, a crucial gauge for the Federal Reserve, is trending in the direction of falling beneath the Fed’s end-2023 projection. This modification is main bond markets to anticipate Federal Reserve price cuts throughout the subsequent yr, regardless of cautionary statements from Fed Chair Jerome Powell concerning the tempo of future price changes.
Buyers’ focus now shifts to the upcoming US shopper inflation knowledge, which coincides with the Federal Reserve’s two-day assembly in mid-December. This assembly will replace key financial projections, together with core inflation and price coverage. This shift in investor sentiment is a part of a broader development, as seen in different world markets. As an example, Euro-zone inflation is cooling quicker than anticipated, and Brazil’s annual inflation is slowing, which might result in extra financial easing in these areas.
Key US financial releases within the coming weeks, together with non-farm payrolls, the CPI report, and private revenue and spending knowledge, will likely be essential for traders. These reviews will supply additional insights into the inflation trajectory and affect future funding choices in inflation-linked bonds and different associated securities.
This article was originally published on Quiver Quantitative
