2024-07-18 17:42:16 ET
Summary
- Treasury Inflation-Protected Securities, a.k.a TIPS funds, have had mixed results due to duration weakness during a rate hike cycle, but long-duration TIPS may make sense now.
- PIMCO 15+ Year U.S. TIPS Index Exchange-Traded Fund ETF targets long-maturity TIPS exposure, providing inflation protection and real returns.
- The LTPZ ETF offers a valuable hedge against inflation, but may be more volatile and lack diversification compared to shorter-maturity TIPS funds.
Treasury Inflation Protected Securities, or TIPS, have gotten some strong attention in the last few years, and I think it's fair to say that the results have been mixed. Not because of the inflation protection, but rather because of duration. The fact that we went through such a vicious duration bear market thanks to the fastest rate hike cycle in history resulted in the duration weakness of some TIPS funds having returns that countered the inflation protection. The good news is? That dynamic is unlikely to persist. This actually means long-duration TIPS might make sense here....
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For further details see:
LTPZ: The Time Is Now (Maybe)