Inflation-Linked Bonds Flatline as TIPs Market Ignores Commodity Carnage and Fed Shakeup

If you’re searching for a pulse in the inflation-linked bond market, you’ll need more than a stethoscope. While commodities are melting down and the Fed is about to get a new, potentially hawkish chair, the TIPs market is doing its best impression of a comatose patient. $TIP sits at $110.45, unchanged, as if the past week’s chaos never happened. For traders who thought inflation hedges would light up on a precious metals selloff and macro drama, this is a reality check.

Let’s start with the facts. Precious metals have cratered, with silver down 27% in a single session and gold not far behind. Global equities are wobbling, Nasdaq futures are off, and Asian and European markets are following suit. The macro backdrop is anything but calm: Kevin Warsh, a name synonymous with hawkish policy, is set to take the Fed’s top job. You’d expect inflation expectations to move, or at least twitch. Instead, TIPs are frozen. No bid, no ask, just stasis.

The disconnect is striking. Historically, TIPs have responded to commodity shocks and Fed pivots with at least a token move. Not this time. Even as the Wall Street Journal warns of seven threats to the US stock market and Seeking Alpha flags a risk of a major crash if P/E multiples contract, the inflation-linked bond crowd is unmoved. Maybe they’re napping. Maybe they’re hedged to the gills. Or maybe, just maybe, the market is calling the bluff on both inflation and the Fed’s ability to reflate.

Context matters. The last time we saw this kind of divergence was in late 2018, when oil collapsed and TIPs refused to budge. Back then, the market was pricing in a Goldilocks scenario: enough growth to keep risk assets afloat, but not enough inflation to scare the bond crowd. We all know how that ended, a sharp correction in equities and a scramble for duration. The difference now is that inflation is already in the system, but the market doesn’t believe it will stick. The TIPs market is telling you: we’ve seen this movie before, and we’re not buying the sequel.

Cross-asset correlations are breaking down. Commodities are in freefall, equities are teetering, and yet real yields are stuck. The Fed’s new direction, with Warsh at the helm, is supposed to be a hawkish pivot, but the bond market is calling his bluff. If inflation was a real threat, TIPs would be ripping. Instead, they’re flatlining. The message: inflation is yesterday’s problem, and the market is already looking past it.

So what’s the real story? The TIPs market is signaling that inflation risk is overblown, and that the real risk is growth. If commodities are crashing and inflation hedges aren’t moving, the market is worried about deflation, not inflation. That’s a big shift from the past two years, when every dip in TIPs was bought on the assumption that inflation would be sticky. Now, the crowd is betting that the Fed will tighten into a slowdown, and that inflation will fade as growth stalls.

Strykr Watch

Technical levels on $TIP are as boring as the price action. Support sits at $110, with resistance at $111. The 50-day moving average is flat, and RSI is stuck near 50, neither overbought nor oversold. Volume is anemic, and open interest is drifting lower. The market is in a holding pattern, waiting for a catalyst that may never come. If $TIP breaks below $110, the next stop is $108, but there’s no urgency in the tape.

The bigger tell is in breakeven inflation rates, which have barely budged despite the commodity rout. Five-year breakevens are holding near 2.1%, down only a tick from last week. The market is pricing in a soft landing, with inflation fading and growth slowing. If that changes, TIPs could wake up, but for now, the market is asleep at the wheel.

The risks are clear. If the Fed surprises with a hawkish hike or signals more tightening, TIPs could break lower. If commodities stage a snapback, inflation expectations could spike, catching the bond crowd offside. And if growth slows faster than expected, real yields could fall, lifting TIPs in a classic risk-off move. The market is complacent, and complacency is always dangerous.

Opportunities are thin, but not nonexistent. For traders willing to fade the crowd, a long TIPs position at $110 with a stop at $108 offers a low-risk inflation hedge if commodities rebound or the Fed blinks. Alternatively, shorting TIPs on a break below $110 could ride a deflation scare if growth data rolls over. The key is to watch for a catalyst, until then, it’s a waiting game.

Strykr Take

The TIPs market is sending a clear message: inflation is no longer the bogeyman. The real risk is growth, and the bond crowd is betting on a slowdown. Don’t sleep on this signal. If the market wakes up, TIPs could move fast, one way or the other. For now, the trade is patience. But when the catalyst comes, be ready to move.