Bond ETFs News:

In response to rising rate expectations and inflationary pressure, fixed-income investors are picking out short-term Treasury Inflation Protected Securities and related exchange traded funds.

Year-to-date, the FlexShares iBoxx 3-Year Target Duration TIPS Index Fund (NYSEArca: TDTT ) is up 0.8%, PIMCO 1-5 Year U.S. TIPS ETF (NYSEArca: STPZ ) is up 1.1% and Vanguard Short-Term Inflation-Protected Securities ETF (NYSEArca: VTIP ) is up 0.9%. [Fight Back Against Inflation with TIPS ETFs ]

The TIPS-related ETFs target the shorter end of the yield curve bond funds with shorter durations are less sensitive to changes in interest rates. TDTT shows a modified adjusted duration of 3.09 years, STPZ has a 2.7 year effective duration and VTIP comes with a 2.0 year average duration.

TIPS securities also provide exposure to government Treasuries whose principal is adjusted to reflect changes in inflation.

The combined hedge against inflation and rising interest rates have helped these fixed-income ETFs attract large inflows. Over the past year, VTIP saw $414 million in new assets and TDTT added $368 million, the Wall Street Journal reports .

Inflation-protection strategies like the VTIP fund generally do well when expectations for inflation are rising, Todd Green, chief investment officer for Alesco Advisors, said in the article.

TIPS have been heavily backloaded, with recent long-term Treasury auctions allowing the Federal Reserve to pile on cheap, extended financing if inflation stays around 2%.

Inflation is also beginning to tick higher after years of quantitative easing and as the economy continues to expand.

TIPS have had a good tail wind this year. We have inflation as opposed to last year when we had disinflation, Gemma Wright-Casparius, who oversees Vanguards inflation-protected securities fund, said in a Reuters article.

The Consumer Price Index has increased 2% year-over-year for four consecutive months and is expected to accelerate to 2.2% later this year and into 2015.

TIPS-related ETFs also help provide another layer of diversification as many aggregate bond funds do not include Treasury Inflation Protected Securities.

For more information on Treasury Inflation Protected Securities, visit our TIPS category .

Max Chen contributed to this article .

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.