Hello! This is markets reporter Isabel Wang bringing you this week’s ETF Wrap. In this week’s edition, we take a look at inflation-protected bond ETFs. They saw significant outflows in the past week as U.S. consumer prices showed signs of moderating in April, though inflation pressures continued to squeeze Americans’ pocketbooks. Please send tips, or feedback, to [email protected] or to [email protected] You can also follow me on Twitter at @Isabelxwang and find Christine at @CIdzelis.
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which tracks an index of Treasury inflation-protected securities, or TIPS, has seen outflows of nearly $340 million over the past week. Outflows on Wednesday alone exceeded $100 million following the release of a widely followed inflation report, according to FactSet data. The U.S. Consumer Price Index report Wednesday showed inflation cooled to the lowest annual rate in two years, but it still remained about more than double the prepandemic average and well above the Federal Reserve’s 2% target rate. CPI rose 0.4% in April from the previous month, much faster than the 0.1% increase recorded in March. Prices climbed 4.9% on a year-over-year basis, down from 5% in March. Excluding volatile food and energy categories, the core CPI rose 0.4% monthly and 5.5% from a year ago, both in line with expectations. Todd Rosenbluth, head of research at VettaFi, said the outflows indicate that investors are responding to inflationary data, and they continue to “be nervous about having exposure to TIPS products.” TIPS are a type of Treasury security issued by the U.S. government, which are indexed to inflation to protect investors from a decline in the purchasing power of their money. Unlike other Treasury securities where the principal is fixed, the principal value of a TIPS adjusts with movements in inflation. When it matures, investors get either the inflation-adjusted price or the original principal, whichever is greater. “Investors have been racing into TIPS ETFs in 2021 in anticipation of higher inflation, and then they’ve been paring back that exposure ever since,” Rosenbluth told MarketWatch in a phone interview on Thursday. “The CPI numbers that came out show that inflation is still here to stay in perhaps different ways than peop …
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