Displaying items by tag: tips
Ban of America says it is a very good time for investors to buy TIPS, or Treasury Inflation-protected securities. The bank thinks inflation expectations are going to rise this year and they are bullish on long-dated TIPS. The call is notable as many fund managers lost money with similar bets after the Crisis, when many thought inflation would jump alongside QE. This time may be different as the Fed has explicitly said it would let inflation run hot to compensate for the slow inflation we have had for the last decade.
FINSUM: We just don’t see inflation rising much in the near term. There are still a lot of worries about the economy. We feel like 2019 would have been the year for big inflation worries/rises, but it didn’t materialize.
Fighting the impact of rising rates on one’s portfolio is likely a primary goal of many advisors and investors right now, so we will be running a series of stories on the topic. For instance, Goldman Sachs has just released a new ETF in the area. In what is being called “smart beta exposure to bond markets”, Goldman has launched the Goldman Sachs Access Inflation Protected US Bond ETF (GTIP). The fund selectively chooses Treasury Inflation Protected Securities and costs 0.12% per year. “TIPS present an attractive diversification opportunity for many investors with relatively low correlations to other major asset classes”, says Goldman.
FINSUM: TIPS seem like a good investment right now, but we wonder how this will perform versus other rate hedged ETFs, most of which seem to have a different angle.. On the plus side, it is quite low cost.
One way to judge the fear level of investors in regards to inflation is to look at flows into TIPS, or Treasury Inflation-Protected Securities. The bond market had its biggest bout of volatility in around a decade over the last 6 weeks, and one big upshot of that has been a surge into TIPS, as investors seek a safe haven for the strong rise in inflation which they see coming. BlackRock’s TIPS ETF, for instance, just hit a new high with $25 bn under management.
FINSUM: Interest in TIPS has a lot to do with the Fed and rates, but also with the government’s budget deficit, which is set to widen.