Biggest Inflation-Hedged ETF Suffers Record $944 Million Outflow

(Bloomberg) -- The world’s biggest inflation-protected bond ETF has been hit by its largest outflow on record, the latest sign that the cross-asset reflation frenzy is cooling.

Investors just pulled $944 million from BlackRock Inc.’s $26.3 billion iShares TIPS exchange-traded fund (ticker TIP), according to data compiled by Bloomberg. That’s by far the largest withdrawal in the more than 17-year history of the product, which buffers investors in government debt against growth in consumer prices.

From oil to copper, investing strategies betting that the U.S. economy will run hot this year are losing a little steam after the recent boom spurred by fresh stimulus and the vaccine rollout.

The TIPS ETF was trading at the highest levels on record before its mid-February retreat, with assets having peaked at more than $27 billion.

Reflation trades have been on a tear across global markets this year, with everything booming from small-cap companies and energy stocks to price-protected debt strategies. But historic valuations and the long journey to a post-pandemic world are giving some investors pause for thought.

Meanwhile, the selloff in long-dated nominal bonds -- among the biggest losers when inflation breaks out -- is easing. Some $755 million was added to the iShares 20+ Year Treasury Bond ETF (TLT) in the past three sessions, according to data compiled by Bloomberg.

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