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The yield on the 5-year TIPS was 2.48% on Wednesday afternoon, while the rate on the 10-year TIPS was 2.29%. The par value of the bonds adjusts with inflation, based on the consumer price index for all urban consumers. Duration is a measure of a bond's price sensitivity to changes in interest rates, and as bond prices swooned in 2022, TIPS also suffered. "They're not always the perfect inflation hedge in the short term, and they are very sensitive to changes in market interest rates." Be aware that while there are no state or local taxes on interest, federal taxes apply.
Persons: Brett Wander, Morningstar, US5YTIPS, Bill Ahmuty, Amy Arnott, They're, Arnott Organizations: Federal Reserve, Schwab Asset Management, Fed, State Street Global Advisors, Morningstar Research Services Locations: TreasuryDirect
High yield mutual funds and exchange traded funds saw inflows of $1.9 billion in July, Barclays said, citing Lipper data. High yield bonds are corporate issues that are rated below BBB, meaning they have a higher risk of default compared to their investment-grade counterparts. "When we are in junk and high yield names, we prefer loans – more senior loan positions rather than high yield." Novak added outside of high yield loans, the firm's other big fixed income play is higher quality investment grade bonds. "We don't think taking a heroic position [in high yield] makes a whole lot of sense in our view," he said.
Persons: Dow Jones, Bill Zox, it's, Zox, Bryan Novak, Novak, Brandywine's Zox, nonbank financials, Bill Ahmuty, Lawrence Gillum, Michael Bloom Organizations: Barclays, Fitch, Management, Brandywine Global, SEC, Astor Investment Management, Corporate, State, LPL
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