U.S. core inflation ticked higher in October and could hit the 2% level early next year, potentially making Treasury Inflation Protected Securities, or TIPS, and the corresponding ETFs fixed income ideas to consider in 2018.
Investors will typically look at TIPS ahead of an inflationary period since buying TIPS after inflation has gone up means that the security has already priced in the inflation and investors would likely be overpaying for the TIPS exposure.
ETF investors can gain exposure to Treasury inflation protected securities through a number of options, including the iShares TIPS Bond ETF (NYSEArca: TIP), Schwab U.S. TIPS (NYSEArca: SCHP) and SPDR Barclays TIPS ETF (NYSEArca: IPE).
Rising core inflation “indicates that the Federal Reserve (Fed) remains on track to lift interest rates in the months ahead. We see scope for monetary policy divergence to feed a further moderate rise in the U.S. dollar in coming months as U.S. yields climb relative to eurozone counterparts,” according to a recent BlackRock note.