TIP: TIPS Are Not Truly Inflation Protected

Jul. 05, 2023 11:37 AM ETiShares TIPS Bond ETF (TIP)TIP30 Comments
Hansen Song
83 Followers

Summary

  • BlackRock's iShares TIPS Bond ETF provides broad exposure to US Treasury Inflation Protected Securities (TIPS).
  • In the high inflation environment of 2022, TIPS declined surprisingly similarly to traditional treasury bonds, due to the Federal Reserve's aggressive interest rate hikes.
  • While TIP offers high investment-grade bonds (AAA), immune to default risk and providing high yields, this also contributes to the fund's historically lower capital appreciation.

Man Stressing Over A Bond Bear Market

DNY59

Strategy

Launched by BlackRock Inc. and managed by BlackRock Fund Advisors, iShares TIPS Bond ETF (NYSEARCA:TIP) provides broad exposure to US TIPS, which are government inflation-linked bonds. This means that the face value of these bonds increase as inflation

This article was written by

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Student at Columbia University with interests in finance, healthcare, and tech.

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