Hedge Against Rising Inflation with TIPS ETFs

April 15th at 6:09am by Tom Lydon

Exchange traded fund (ETF) investors may utilize Treasury Inflation-Protected Securities as a way mitigate the potential hit from inflation.

On Friday, the Labor Department said the Consumer Price Index (CPI) rose by 0.5% in March.

A report earlier this week estimated producer prices climbed a seasonally adjusted 0.7% in March, following a 1.6% gain in February and a 0.8% increase in January. The core rate, which excludes the volatile food and energy categories, rose 0.3% in March. [ETFs React To Economic Reports.]

Bonds ETF investors may hedge rising inflation through TIPS. These securities link principal to the CPI, which some say understates true consumer inflation. [Bond ETF Investors Can Hedge Inflation With TIPS.]

The difference between yields on 10-year notes and TIPS recently was at its widest point since March 9, signaling traders are positing for higher inflation. [Treasury ETFs Soft As Traders Await Fed Speeches.]

  • iShares Barclays TIPS (NYSEArca: TIP)
  • iShares Barclays 0-5 Year TIPS (NYSEArca: TIPS)
  • PIMCO 1-5 Year U.S. TIPS (NYSEArca: STPZ)
  • PIMCO 15+ Year U.S. TIPS Index Fund (NYSEArca: LTPZ)
  • PIMCO Broad U.S. TIPS Index Fund (NYSEArca: TIPZ)
  • Schwab U.S. TIPS (NYSEArca: SCHP)
  • SPDR Barclays Capital TIPS ETF (NYSEArca: IPE)

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

For full disclosure, Tom Lydon’s clients own TIP.

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.