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Inflation Angst Turns TIPS Into Must-Watch $1.6 Trillion Market

  • Auction next week means focus on TIPS market set to continue
  • Market in ‘negative feedback loop on inflation,’ trader says
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Photographer: Stefani Reynolds/Bloomberg

The U.S. is about to sell 10-year inflation-linked debt next week, keeping the spotlight on a corner of the bond market that’s rarely garnered this much attention in the almost quarter-century since its debut.

Heightened fears about the risk of raging consumer-price gains as growth rebounds are driving investors of all stripes to search for cover in Treasury Inflation-Protected Securities, a market that’s grown to $1.6 trillion. Traders talk of new entrants like retail buyers and global macro strategists -- what the veterans are dubbing the “tourist crowd.” Cash has also been flowing into the largest exchange-traded fund for TIPS, part of the rabid demand that’s driven inflation expectations over the next half-decade to a 16-year high.