- Many investors confuse the price action of TIPS with inflationary effects.
- TIPS respond to changes in interest rates just like regular treasury bonds, but their coupon can adjust with changes in CPI.
- Right now, we aren't seeing adverse inflationary effects, which is why TIP may not be the most suitable fixed-income investment.
- A key precursor of inflation at the consumer level is an elevation in producer prices.
- Traditionally, the Fed uses rate increases to curb the effect of exuberant commodity prices.
- There’s more concern about inflation in foreign markets than there is in the United States.
- The odds of inflation and a hike in interest rates are higher now than at any time in the past five years.
There are no Transcripts on TIP.
Wed, Jun. 25, 4:41 AM
- Expectations of U.S. and euro zone break-even rates seem to be heading in opposite directions, as investors wager on opposing consumer price outlooks. The break-even rates, as measured by the difference between yields on 10-year nominal Treasury notes and TIPs, are at about 2.3% in the U.S. This greatly differs in the euro zone, where Germany reports a rate of 1.3%.
- TIPs are expected to gain in popularity over the next year, as break-evens expect to rise in par with U.S. inflation. However, the euro zone is currently dealing with a falling inflation rate. Despite the European Central Bank instituting a 2% inflation mandate, annual inflation in the euro zone was only 0.5% in May.
- ETFs: TIP, WIP, VTIP, SCHP, IPE, LTPZ, STPZ, TIPZ, STIP, ILB, ITIP, GTIP, TPS, TDTT, TIPX, TDTF, SIPE, RINF, INFL, UINF, FINF, DEFL, SINF
Fri, Jun. 6, 4:17 PM
Mon, Mar. 31, 7:53 AM
- After pouring money into U.S. Treasury ETFs in the first two months of the year, investors pulled $10.3B in March, the largest amount withdrawn since December 2010, according to Bloomberg. The $7.86B iShares 1-3 Year Treasury Bond ETF (SHY) is the leader on a percentage basis - losing one-third of its AUM this month.
- The catalyst is clearly the FOMC's signal on rate hikes beginning in about a year. “When the market thinks the Fed is going to raise rates, they don’t tend to stick around in short-dated bonds,” says global macro strategist Thomas Higgins.
- Short-duration Treasury ETFs: SHY, BIL, SHV, VGSH, SCHO, DTUL, SST, DTUS, TUZ
- In other areas of fixed income, inflation--linked bond ETFs had their first inflows in 19 months, and investors continue to plow money in high-yield.
- TIPs and junk ETFs: HYG, JNK, TIP, HYLD, HYS, SJNK, PHB, VTIP, IPE, SCHP, SJB, STPZ, LTPZ, TIPZ, HYHG, STIP, ANGL, HYLS, XOVR, THHY, UJB, TPS, SHYG, QLTC, TDTT, TIPX, HYZD, TDTF, HYND, SIPE
Thu, Mar. 20, 3:24 PM
- "Investing in fixed income today is almost the opposite of what it was one year ago," says BlackRock's Rick Rieder, believing those sectors which performed poorly last year will do well in 2014. As such, he sees the best value in long-dated munis and long-dated TIPs, and wants to avoid the belly of the curve - 3 to 7 years.
- He gives Janet Yellen good grades for her performance yesterday, saying she's merely acting appropriately to changing economic conditions. The "dots" are "a survey, not policy," says Rieder, but nevertheless, the markets quickly priced to them.
- ETFs: TIP, MUB, IEF, HYD, PST, BAB, PZA, MUNI, VTIP, IEI, IPE, TFI, SCHP, TYO, DTYS, LTPZ, STPZ, ITM, HYMB, TIPZ, UST, MLN, CMF, TBX, STIP, VGIT, SHM, BABZ, XMPT, BABS, SUB, PRB, GSY, NYF, PZT, SMB, SCHR, DTYL, ITE, CXA, SHYD, TYD, PWZ, TPS, FIVZ, PVI, DFVL, TDTT, TBZ, SMMU, INY, MUAF, TIPX, TDTF, DFVS, VRD, MUAG, MUAD, MUAE, TYNS, MUAC, GMMB, MUAH, RVNU, SIPE
Thu, Feb. 27, 11:26 AM
- The SPDR Barclays 0-5 Year TIPS ETF (SIPE) launches today and will offer investors short term exposure to the TIPS market; this space features a lot of competition.
- The iShares Enhanced International Large Cap ETF (IEIL) and Enhanced International Small Cap ETF (IEIS) began their active strategy this morning and offer expense ratios of 0.35% and 0.49% respectively.
- The PowerShares International BuyBack Achievers Portfolio (IPKW), like IEIL and IEIS, is based on a previously launched domestic strategy; the PowerShares BuyBack Achievers Portfolio (PKW).
- TIPS ETFs: TIP, VTIP, IPE, SCHP, STPZ, LTPZ, TIPZ, STIP, TPS, TDTT, TIPX, TDTF
- Broad international ETFs: VT, VSS, SCZ, DLS, ACWI, IOO, SCHC, ONEF, DGT, FIGY, RWV, FNDC, TOK
- Buyback ETFs: SYLD, FYLD
Fri, Feb. 14, 4:27 PM
Dec. 18, 2013, 2:22 PM
- "The Committee sees the improvement in economic activity and labor market conditions ... as consistent with growing underlying strength in the broader economy," the FOMC says, adding that the decision to scale back QE by $10B per month is based on "the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions."
- Although the Committee says it will "likely reduce the pace of asset purchases in further measured steps [should] incoming information support [the] ongoing improvement in labor market conditions and inflation moving back toward [the] longer-run objective," the Fed notes that asset purchases are "not on a set course."
- FOMC also says it "anticipates .. that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6.5%."
- Updated FOMC projections: 2014 PCE inflation now seen at 1.4-1.6% (from 1.3-1.8% in September); 2014 GDP now seen at 2.8-3.2% (from 2.9-3.1% in September); 2014 unemployment rate now seen at 6.3-6.6% (from 6.4-6.8% in September). Full release
- 10-year yield is at 2.91% versus 2.87% just prior to the announcement.
- Dow (DIA +0.9%), S&P (SPY +0.6%), and Nasdaq (QQQ) all staged brief rallies on the news but have since retraced a bit. Gold (GLD +0.3%) fell sharply initially but recovered.
- ETFs: TBT, TLT, TIP, TMV, SHY, IEF, TBF, PST, EDV, TTT, TMF, VTIP, TLH, IPE, ZROZ, SBND, IEI, SCHP, DLBS, TYO, LTPZ, DTYS, STPZ, STPP, VGLT, TIPZ, UST, BIL, SHV, STIP, PLW, GOVT, FLAT, UBT, TBX, TLO, VGSH, VGIT, RINF, GSY, DTYL, LBND, SCHR, SCHO, TYD, ITE, TYBS, TPS, TRSY, TENZ, DTUL, TDTT, TUZ, SST, INFL, DTUS, FIVZ, TBZ, DFVL, FINF, UINF, DLBL, DEFL, DFVS, TIPX, TDTF, TYNS, SINF
Dec. 12, 2013, 6:53 PM
- The U.S. House overwhelmingly approves (332-94) a two-year budget framework spearheaded by Paul Ryan and Patty Murray that would remove the threat of a shutdown during the period. The eye-to-eye across the aisle comes as somewhat of a surprise and a rarity amid the rancor that has gripped budget battles in the past 2 years.
- John Boehner noted that the measure amounted to a small step toward the GOP's goal of deficit reduction: "Is it perfect? Does it go far enough? No, not at all," he said, while urging colleagues to support the plan. Democrat Chris Van Hollen: a "small positive step forward."
- The deal now goes to a Democratic Senate, which is expected to sign off as early as next week.
- Treasury ETFs: TBT, TLT, TIP, TMV, SHY, IEF, TBF, PST, EDV, TTT, TMF, VTIP, IPE, TLH, ZROZ, SBND, IEI, SCHP, DLBS, TYO, LTPZ, DTYS, STPZ, VGLT, TIPZ, UST, BIL, SHV, STIP, PLW, GOVT, UBT, TBX, TLO, VGSH, VGIT, RINF, DTYL, GSY, LBND, SCHR, TYD, SCHO, ITE, TYBS, TPS, TRSY, TENZ, INFL, SST, DTUL, TDTT, TUZ, FIVZ, DTUS, TBZ, FINF, DFVL, UINF, DEFL, DLBL, DFVS, TDTF, TIPX, TYNS, SINF
Dec. 2, 2013, 7:53 AM| Comment!
Nov. 29, 2013, 12:47 PM
- TIPS fared even worse than regular Treasurys in the bond market selloff this summer, and - down 8% YTD - are headed for their poorest performance since they were brought to market in 1997. The 10-year yield gap - the difference between 10-year yields on nominal and inflation-protected Treasurys, and a measure of inflation expectations - has shrunk to 2.14% from 2.5% at the start of the year.
- TIPS owners for years have accepted negative real yields on the expectation the Fed's monetary ease would lead to higher inflation. With inflation still quiet and the Fed set to wind down its QE, where's a TIPS bull to turn to? 2014 may be even worse, says JPMorgan, which sees CPI no higher than 1.7%. Combined with what the team expects will be a 120 basis point rise in real yields, it translates into a 8.4% loss for TIPS.
- Maybe bailing out TIPS next year would be a Yellen-led Fed indicating a greater tolerance for higher inflation and yet more delays in the taper.
- TIPS ETFs: TIP, VTIP, IPE, SCHP, LTPZ, STPZ, TIPZ, STIP, TPS, TDTT, TDTF, TIPX
Nov. 16, 2013, 10:08 PM
- "Our problem is that the S&P is up this year about 25% on earnings that are up 3%. So we've got a market that is rising because of P/E expansion," 21-year GMO veteran Ben Inker tells Barron's (one recalls a similar warning from Guggenheim back in August).
- Inker argues that because P/E multiples are still expanding at a time when profit margins are "already as good as we've ever seen," the prospects for upside surprises to profit growth look "pretty dim" going forward.
- As for bonds, Inker characterizes the return on U.S. government debt as "horrible" and says corporate debt "is riskier than people are making it out to be, particularly the very low-rated stuff."
- Inker's picks for the current environment: TIPS, "high-quality" U.S. companies, and emerging-market stocks where reasonable valuations leave room for some upside.
- "High-quality" U.S. stocks mentioned include: JNJ, MCD, WMT, MSFT
- TIPS ETFs: TIP, VTIP, IPE, SCHP, LTPZ, STPZ, TIPZ, STIP, TPS, TDTT, TDTF, TIPX
- EM ETFs: EEM, VWO, EDC, EDZ, SCHE, IEMG, EEV, PIE, ADRE, EUM, EET, GMM, EEME, EMCR, DBEM, EWEM, FEM, EMLB, EMSA, EMFT, EMDR
- High-yield ETFs: HYG, JNK, HYS, HYLD, SJNK, PHB, SJB, ANGL, XOVR, UJB, QLTC
Nov. 1, 2013, 4:27 PM| Comment!
Oct. 23, 2013, 2:58 PM
- Assets in dividend-themed ETFs have ballooned nearly 50% to $80B this year, according to Ned Davis Research, led by Vanguard Dividend Appreciation (VIG) with $3.2B in inflows, the SPDR Dividend ETF (SDY) with $1.2B, and the Vanguard High Dividend Yield ETF (VYM) with $1.6B.
- Meanwhile, ETFs holding U.S. government debt hold just $67B in assets, with funds like the iShares 3-7 Year Treasury Bond ETF (IEI) seeing several hundred million exit, and the iShares TIPS Bond ETF (TIP) losing a whopping $6.9B.
- The team at Ned Davis recommends looking away from the popular dividend plays and towards a lagging emerging-market alternative, the WisdomTree Emerging Markets Small-Cap Dividend Fund (DGS), yielding 3.3% and up 3.8% this year.
- Dividend ETFs: FDL, FVD, MDIV, QDF, QDYN, QDEF, DIV, CVY, DVY, HDV, IYLD, PEY, PFM, SCHD, SDY, SDYL, DVYL, VYM, DHS, DTD, SYLD, KBWD, SPHD, DLN, DON, HILO, DGRS, DNL, EMDG, DGRW, VIG, DGRE.
- Global dividend ETFs: AXJL, AUSE, GNAT, DTH, DWM, SDIV, DVYE, EDIV, DEM, FDD, FGD, LVL, PID, DEW, WDIV, IDOG, DTN, DOO, IQDF, IQDE, IQDY, IDV, DVYA, DWX, DOL, CCXE, DIM, GULF, DRW, DBU.
- Small-cap dividend ETFs: DGS, DFE, DFJ, DXJS, DES, DLS.
Oct. 2, 2013, 10:20 AM| Comment!
Sep. 3, 2013, 1:51 PM| Comment!
Aug. 19, 2013, 3:57 AM
- Outflows from U.S. bond mutual funds and ETFs have risen to $19.7B in August from $14.8B in July, TrimTabs says, making this month's figure so far the fourth-highest on record.
- Since the beginning of June, $103.5B has left bond funds, or 2.7% of total assets.
- The sell-off in bonds, which has been prompted by fears of Fed tapering, has sent Treasury yields higher, with the 10-year hitting 2.871% today, the highest for just over two years.
- "We are concerned that the Fed is starting to lose control of the bond market, which is not good news for the stock market or the highly leveraged U.S. economy," TrimTabs said
- Related ETFs: AGG, BND, LAG, SCHZ, BOND, SAGG, MINC, TRSY, PLW, GOVT, TLH, TLT, IEF, DTYL, DLBL, ILTB, TENZ, ITE, TLO, EDV, VGIT, VGLT, TMF, TYD, LBND, UBT, UST, TMV, TYO, DSTJ, DSXJ, SBND, PST, TBT, DTYS, DLBS, TBF, TTT, TYNS, TYBS, TBX, SHY, SHV, IEI, BIL, TUZ, FIVZ, DTUL, VGSH, DTUS, DFVS, DFVL, SST, ISTB, TBZ, TIP, STIP, LTPZ, STPZ, TIPZ, SCHP, IPE, TPS, TDTT, TDTF, RINF, FINF, INFL, DEFL, UINF, SINF, VTIP, TIPX, STPP, FLAT
TIP vs. ETF Alternatives
The iShares Barclays Treasury Inflation Protected Securities Bond Fund seeks results that correspond generally to the price and yield performance, before fees and expenses, of the inflation-protected sector of the United States Treasury market as defined by the Barclays Capital U.S. Treasury Inflation Protected Securities (TIPS) Index (Series-L).
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