Investors pile into TIPS as inflation expectations rise

Investors are increasingly putting money into Treasury Inflation Protected Securities (TIPS) in a sign that they expect US inflation to pick up.

Data from Bank of America Merrill Lynch shows that TIPS attracted net inflows of $1.2bn in the week to November 22.

It is the third largest weekly inflow recorded over the past decade.

While US inflation has remained relatively subdued this year, the Federal Reserve has continued its monetary tightening cycle, having raised interest rates in March and June, in addition to its rate increase December of last year.

The Fed is already on course for one further rate rise next month.

Inflation to pick up

Rising purchases of TIPS likely show that investors believe US inflation is about to finally pick up.

US economic data has remained generally positive over recent months, while the labour market is also especially tight.