We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
The annual inflation rate in the United States jumped to 4.2% in April 2021 from 2.6% in March and well above market forecasts of 3.6%. It marked the highest reading since September 2008, thanks to the surge in pent-up demand amid economic reopening. Surging commodity prices and a supply crunch have also been aiding to the inflation.
There is also a base effect weighing as the coronavirus outbreak had dented economic activity, taking the inflation rate to 0.3% in April 2020. The biggest increases were recorded for gasoline (49.6% vs. 22.5% in March), fuel oil (37.3% vs. 20.2%), and used cars and trucks (21% vs. 9.4%). Inflation also accelerated for shelter (2.1% vs. 1.7%) and new vehicles (2% vs. 1.5%) and rebounded for apparel (1.9% vs. -2.5%).
Great Time for TIPS ETFs?
TIPS ETFs offer robust real returns during inflationary periods unlike its unprotected peers in the fixed-income world. These securities pay an interest on an inflated-principal amount (principal rises with inflation) and when the securities mature, investors get either the inflation-adjusted principal or the original principal, whichever is greater. As a result, both the principal amount and the interest payments will keep on increasing with rising consumer prices (read: Inflation Zooms to 13-Year High: 5 Solid TIPS ETF Picks).
This mechanism has made TIPS ETFs investors’ darlings in recent times as they are increasingly betting on inflation-protected bond funds. Though the expected trend of inflation depends a lot on the movement of energy prices, investors with a long-term view can count on the potential uptick in inflation as the U.S. economic backdrop appears more stable than before.
Needless to say, TIPS ETFs will soar amid such a situation. Below we highlight a few TIPS ETFs that are hovering around an all-time high.
The underlying Bloomberg Barclays U.S. Treasury Inflation-Protected Securities (TIPS) 0-5 Year Index is a market capitalization-weighted index that includes all inflation-protected public obligations issued by the U.S. Treasury with remaining maturities of less than 5 years. The fund charges 5 bps in fees.
The underlying Bloomberg Barclays U.S. Treasury Inflation-Protected Securities (TIPS) 0-5 Years Index (Series-L) comprises inflation-protected U.S. Treasury bonds with remaining maturities of less than five years. The fund charges 5 bps in fees.
The underlying ICE BofAML 1-5 Year US Inflation-Linked Treasury Index comprises U.S. Treasury Inflation Protected Securities with at least $1 billion in outstanding face value and a remaining term to final maturity of at least 1 year and less than 5years. It charges 20 bps in fees.
Purebetasm 0-5 Year US TIPS Invesco ETF (PBTP - Free Report)
The underlying ICE BofAML 0-5 Year US Inflation-Linked Treasury Index measures the performance of US Treasury Inflation-Protected Securities with a remaining maturity of at least one month and less than five years. The fund charges 7 bps in fees.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
4 TIPS ETFs at All-Time High
The annual inflation rate in the United States jumped to 4.2% in April 2021 from 2.6% in March and well above market forecasts of 3.6%. It marked the highest reading since September 2008, thanks to the surge in pent-up demand amid economic reopening. Surging commodity prices and a supply crunch have also been aiding to the inflation.
There is also a base effect weighing as the coronavirus outbreak had dented economic activity, taking the inflation rate to 0.3% in April 2020. The biggest increases were recorded for gasoline (49.6% vs. 22.5% in March), fuel oil (37.3% vs. 20.2%), and used cars and trucks (21% vs. 9.4%). Inflation also accelerated for shelter (2.1% vs. 1.7%) and new vehicles (2% vs. 1.5%) and rebounded for apparel (1.9% vs. -2.5%).
Great Time for TIPS ETFs?
TIPS ETFs offer robust real returns during inflationary periods unlike its unprotected peers in the fixed-income world. These securities pay an interest on an inflated-principal amount (principal rises with inflation) and when the securities mature, investors get either the inflation-adjusted principal or the original principal, whichever is greater. As a result, both the principal amount and the interest payments will keep on increasing with rising consumer prices (read: Inflation Zooms to 13-Year High: 5 Solid TIPS ETF Picks).
This mechanism has made TIPS ETFs investors’ darlings in recent times as they are increasingly betting on inflation-protected bond funds. Though the expected trend of inflation depends a lot on the movement of energy prices, investors with a long-term view can count on the potential uptick in inflation as the U.S. economic backdrop appears more stable than before.
Needless to say, TIPS ETFs will soar amid such a situation. Below we highlight a few TIPS ETFs that are hovering around an all-time high.
ETFs in Focus
Short-Term Inflation Protected Vanguard (VTIP - Free Report)
The underlying Bloomberg Barclays U.S. Treasury Inflation-Protected Securities (TIPS) 0-5 Year Index is a market capitalization-weighted index that includes all inflation-protected public obligations issued by the U.S. Treasury with remaining maturities of less than 5 years. The fund charges 5 bps in fees.
0-5 Year TIPS Bond iShares ETF (STIP - Free Report)
The underlying Bloomberg Barclays U.S. Treasury Inflation-Protected Securities (TIPS) 0-5 Years Index (Series-L) comprises inflation-protected U.S. Treasury bonds with remaining maturities of less than five years. The fund charges 5 bps in fees.
1-5 Year US TIPS Index ETF Pimco (STPZ - Free Report)
The underlying ICE BofAML 1-5 Year US Inflation-Linked Treasury Index comprises U.S. Treasury Inflation Protected Securities with at least $1 billion in outstanding face value and a remaining term to final maturity of at least 1 year and less than 5years. It charges 20 bps in fees.
Purebetasm 0-5 Year US TIPS Invesco ETF (PBTP - Free Report)
The underlying ICE BofAML 0-5 Year US Inflation-Linked Treasury Index measures the performance of US Treasury Inflation-Protected Securities with a remaining maturity of at least one month and less than five years. The fund charges 7 bps in fees.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>