In a surprising development, mutual funds and exchange-traded funds targeting inflation-protected Treasurys, known as TIPS, pulled in $1.2 billion in the week ended Wednesday. That represented the largest draw since November 2016 and was the third-largest weekly inflow on record.
That burst of TIPS fund buying contrasts with recent inflation readings. The Labor Department’s consumer-price index rose 2 percent in October from a year earlier while the Fed’s preferred measure of inflation rose 1.6 percent in September from a year earlier, well below the central bank’s 2 percent target.
The 10-year break-even rate—the yield premium investors demand to hold the 10-year Treasury note relative to the 10-year TIPS—was 1.87 percent at the end of last week. That's been pretty steady over the past three months.
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