Inflows into US inflation-linked bonds have surged over the past 12 months as investors look to hedge their portfolios against the prospect of rising inflation.
BlackRock's Global ETP Landscape report for October revealed that year-to-date inflows for US Treasury Inflation-Protected Securities (TIPS) exchange-traded products have been the highest on record since 2009.
In the year-to-date to 31 October 2016, investors have directed US$8.1 billion into US TIPS exchange-traded products. Inflows into US TIPS for October were $2.1 billion, making it the most popular asset class for the month.
Other 'tailwinds' for TIPS include healthier US labour market data, with higher participation, lower jobless claims and faster wage growth.
Stronger commodities prices (particularly oil) also moderate the downside risk to the relative performance of TIPS, said BlackRock.
"Political uncertainty [is also a factor]. One of the unintended consequences of the political retreat from global trade is rising prices for consumers, a scenario perversely beneficial to TIPS," said BlackRock.
In recent weeks, Donald Trump's victory in the US presidential election has further stoked fears of rising inflation – largely as a result of his stated plans to increase fiscal spending.