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Inflation-protected bonds may be the last thing on investors' minds amid cooling prices, but BlackRock is betting on the securities for the longer term. Due to that, BlackRock named inflation-protected securities one of its top 2024 strategic calls for those with a time horizon of five to 10 years. "We see inflation going through a roller coaster over a longer term," Li said. Buying TIPS Investors can buy TIPS in five-year , 10-year and 30-year terms through the TreasuryDirect website . BlackRock, which has a traditional TIPS ETF, also recently launched a suite of defined maturity TIPS ETFs last fall.
Persons: Wei Li, Li, BlackRock, We've Organizations: BlackRock, Bank of America Securities, U.S . Bureau of Labor Statistics, Federal Locations: redemptions, U.S
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
The Wall Street firm upgraded the 5-year securities, known as TIPS, to most preferred from neutral on Wednesday. The yield on 5-year TIPS hit 2.24% on Wednesday, the highest real yield the sector has seen in over 15 years, said Leslie Falconio, head of fixed income strategy in UBS Americas' chief investment office. TIPS yields account for inflation, but Treasury yields are nominal and don't take inflation into account. "While investors were confronted with historically high inflation, TIPS proved to be a disappointment as the interest rate component dramatically underperformed," she said. Those higher real yields also have been a contributor to rising nominal yields, she said.
Persons: Leslie Falconio, Falconio, Michael Bloom Organizations: UBS, Federal Reserve Locations: UBS Americas
Total: 3