October US Inflation Highest In 9 Months: TIPS ETFs In Focus

Consumer prices in the United States rose 2.5% year over year in October 2018, in line with market expectations and above September’s 2.3%. Higher oil and gasoline prices kept inflation steady. Year over year, prices rose faster for fuel oil (26.2% from 23.4% in September) and gasoline (16.1% from 9.1%).

On a monthly basis, consumer prices rose 0.3%, higher than 0.1% in September and in line with forecasts. The rise marked the highest monthly gain in nine months. The indexes for shelter, used cars and trucks, medical care, household furnishings and operations, motor vehicle insurance, and tobacco increased on a monthly basis in October.

Below we highlight a few TIPS ETFs that could be compelling investments if U.S. inflation continues to scale higher (see: all TIPS ETFs here):

Invesco PureBetaSM 0-5 Year US TIPS ETF PBTP — Up 0.9% past week (as of Nov 14, 2018)

The underlying ICE (NYSE:ICE) BofAML 0-5 Year US Inflation-Linked Treasury Index measures the performance of US Treasury Inflation-Protected Securities with a remaining maturity of at least one month and less than five years. Effective maturity of the fund is 2.36 years and effective duration is 2.31 years. It yields 2.75% annually and charges 7 bps in fees (read: Goldman Sachs (NYSE:GS) Launches TIPS ETF).

PIMCO 15+ Year US TIPS Index Fund LTPZ — Up 0.7%

The ICE BofAML 15+ Year US Inflation-Linked Treasury Index comprises of U.S. Treasury Inflation Protected Securities with at least $1 billion in outstanding face value and a remaining term to final maturity greater than 15 years. It yields about 3.44% annually and charges 20 bps in fees. Weighted average maturity is 24.88 years and effective duration is 21.52 years.

FlexShares iBoxx 5-Year Target (NYSE:TGT) Duration TIPS Index Fund TDTF — Up 0.6%

The fund’s effective duration is 4.78 years and weighted average maturity is 7.23 years. It yields about 2.95% annually and charges 18 bps in fees. Bonds with maturity of 5-10 years take the highest share of the fund with about 78% exposure.

Schwab U.S. TIPS ETF (SIX:SCHP) — Up 0.5%

The underlying index includes all publicly-issued U.S. Treasury Inflation-Protected Securities that have at least one year remaining to maturity, are rated investment grade and have $500 million or more of outstanding face value. It yields 2.81% annually and charges 5 bps in fees. Its option adjusted duration is 7.5 years and average maturity is 8.2 years.

SPDR Barclays (LON:BARC) Capital TIPS ETF ( (WA:IPE) ) – Up 0.5%

The underlying index includes publicly issued, U.S. Treasury inflation protected securities that have at least one year remaining to maturity on index rebalancing date. Weighted average maturity of the fund is 8.61 years while effective duration is 7.86 years. It yields 3.77% annually and charges 15 bps in fees.

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