It’s seeming apparent that fixed income exchange traded funds (ETFs) will be affected by the market turmoil, and higher inflation is inevitable, which may hamper these funds, reports Joe Morris for Ignites.
While high inflation is hampering these funds, but the credit crisis is the real culprit in suppressing the yields. Inflation is currently at 5.4%, while earlier this week, 10-year Treasury yields were at 3.5% as investors snatched them up.
On Friday, as investors unloaded their safe havens after the government announced measures to solve the credit crisis, yield on the 30-year Treasury rose to 4.39%.
Of the 1720 fixed-income funds available in the U.S., only 30 non-leveraged, non-Treasury Inflation Protected portfolios can reports total returns actually beating inflation this year, says Morningstar.
On the bright side, some analysts think inflation is over since energy prices have eased and growth has slowed. Plus, there are great bargains to be had for mortgage-related assets, agency debt, and non-U.S. assets.
Some fixed income ETFs:
- iShares Lehman Short Treasury Bond Fund (SHV), up 2.4% year-to-date
- SPDR Barclays TIPS (IPE), up 3.3% year-to-date
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.