iShares TIPS Bond

In this part, we will discuss Dr. Plosser’s views on the use of systematic tools, for example, Taylor-like rules for setting policy rates and communicating these to markets.

The last three trading sessions in May are likely to be influenced by geopolitical issues rather than economic data.

Recent readings have shown that inflation has stabilized, which is a good thing, but signs of an imminent acceleration in inflation are still scant.

TIPS give investors a hedge against inflation, like gold and other commodities. This protection, however, comes at the cost of lower coupons.

In its July meeting, the Federal Open Market Committee decided to maintain its target range for the federal funds rate at 1%–1.25%, in line with the market’s expectations.

The real threat from rising rates is for bond markets.

According to the April JOLTS report, there were 6.7 million job openings at the end of April compared to 6.6 million in March.

Job additions, which had scared policymakers and market participants alike with the downward revision for April and dismal additions in May, seem firmly back on track.

FOMC members after the latest policy statement have remained biased toward further rate hikes, but markets have questioned the Fed’s hawkishness.

Inflation hedge Investors tend to hold gold in their portfolios as insurance against inflation. When inflation is high, the value of paper currency, in terms of the goods and services it can buy, falls. As investors want something that doesn’t lose its value, gold usually has a direct relationship with inflation. Demand for gold increases as inflation […]

Some FOMC participants thought that the unemployment rate was close to or below what they assessed to be the long-term normal rate.

As per the U.S. Bureau of Labor Statistics, the US Consumer Price Index (or CPI) rose 0.2% in February, compared to a 0.5% rise in January 2018.

The market may be too complacent about inflation expectations at the moment. If this is true, this makes TIPS attractive at the moment.

A slowing global economy is also a worrying factor for Charles Evans. Companies with an export focus will hire fewer people if there are fewer orders.

The US equity markets (SPY) haven’t seen any major impacts from the Fed’s policies in the recent past.

What should fixed income investors do today? Generally, widening spreads provide a buying opportunity for investors, because spreads widen when yield of a security rises.

While no longer cheap per se after their extraordinary run in 2014, municipal bonds continue to look attractive versus both Treasuries and corporate bonds.

After a prolonged calm period, a sell-off in equities (SPY) (QQQ) in October and again in November has shaken the markets out of their slumber.

Municipal bonds (or munis) were the best performers in 2015 with returns of 3.2%. Meanwhile, investment-grade corporate bonds (LQD), long-dated Treasuries (TLT), and high-yield bonds (HYG) all gave negative returns in 2015.

ETFs and ETNs are very similar—both trade on an exchange like a stock, follow an underlying product, and are easily accessible to investors.

In this series, we’ll introduce you to the concept of exchange-traded funds (or ETFs). You’ll find out about the types of ETFs and how they can help your portfolio.

According to the March 2015 policy statement, policymakers now forecast only up to two rate hikes this year. This translates to a total rate hike of 50 basis points.

With the US economy gearing itself up for the another rate hike, investors are investing in short-term Treasury securities whose price will fall less in value when interest rates rise.

The yield curve is a graph that plots interest rates at different maturities with the same credit quality that can range from a month to 30 years or more.

The core Consumer Price Index, excluding food and energy prices, shows some firming in inflationary conditions. The Core CPI has ticked upward for the last three straight months.

Gundlach expected the Fed to go from two expected hikes in 2019 to 0.5 hikes. However, the Fed surprised him by projecting no hikes this year.

Fed policymakers are watching the job data closely, as it gives them insight as to whether the US economy is strong enough to withstand interest rates hikes.

With interest rates volatile and market conditions changing, these are tricky times for bond markets. Rick Rieder outlines three ways markets are evolving, and suggests that staying flexible will be critical.

The July 2016 meeting minutes showed that policymakers expect PCE inflation to remain low in the short term, primarily because of the lingering effect of the fall in crude oil prices.

I’m not that enthusiastic about this asset class because TIPS are currently not cheap. In fact, in this environment the real return on a TIP, i.e. how much money an investor gets back after inflation – is actually negative.

From TIPS to “phantom income” to varying distributions — Matt Tucker is here to explain what they are and how they are related.

The Bureau of Labor Statistics (or BLS) developed the U.S. CPI in 1913 to measure the change in prices.

Forecasting is always a tricky business, but we do believe there are some important factors that will shape the future direction of the bond market and that will have an impact on the way investors should approach fixed income.

We could see this nudging up Treasury yields and supporting the U.S. dollar. Gold may be a better hedge in the short run.

I anticipate that the weak August payroll report will be revised higher and that inflation should firm. Along with their revised expectation of the path of policy rates, Fed officials seem to be on the same page as me.

On June 12, the US Bureau of Labor Statistics reported that US consumer prices rose 0.2% in May, adding to the 0.2% increase seen in April.

TIPS may offer some value as inflation breakeven seems modest. TIPS provide investors a hedge against inflation just like gold (GLD) and other commodities (DBC).

A sharp drop in PCE inflation was caused by the decline in crude oil prices that began in mid-2014.

We see inflation-linked bonds such as US Treasury Inflation-Protected Securities (TIPS) as a valuable hedge against inflation. We also like inflation-linked debt in the Eurozone and Japan as a potential substitute for nominal bonds. Market Realist: inflation-linked bonds could turn out to be a better choice Inflation-linked bonds (TIP) provide a hedge against inflation by […]

Founded by Ray Dalio, Bridgewater Associates’ top sell in the third quarter was the iShares MSCI Emerging Markets ETF (EEM).

Inflation-linked bonds are structured to negate the inflation risk of an investment.

For investors who buy short-term, high-quality debts like T-bills, FRNs provide a very good alternative.

Last week, the U.S. Treasury auctioned securities worth $95 billion. These included Treasury bills and Treasury Inflation Protected Securities (or TIPS). TIPS offer bond investors protection against rising inflation. Despite the low bid-cover ratio, market demand for the securities rose.

The short-term securities that have already been auctioned last week include four-week, 13-week, and 26-week T-Bills.

While munis are no longer cheap on an absolute basis, they remain relatively attractive, especially long-end muni bonds. Plus, the sector looks compelling given improving issuer credit conditions and higher tax revenues.

Loretta Mester is the new president and chief executive officer of the Federal Reserve Bank of Cleveland. She has taken over the reins from Sandra Pianalto, who retired on May 31.

Munis remain a high-quality asset class offering yields that today rival those of Treasuries and many corporate bonds before tax — and look even better after.

The U.S. Treasury auctioned five-year TIPS worth $16 billion on August 21—lower than the $18 billion auctioned in April. Despite lower issuance, demand for the securities was lower at 2.48x—compared to 2.70x for the April auction.

One of the strongest drivers of fair trade in gold (or IAU) is real interest rates.

The U.S. Treasury Department issues Treasury securities of varying maturities to finance government debt. The yield on these securities is determined through a public auction process

“Industrials, materials, and financials are the sectors. . .you want to be invested in,” said Jeffrey Gundlach recently in a CNBC interview.

The high yield bond funds flow turned positive last week after a relatively small outflow the previous week, which broke the line of seven straight weeks of inflows.

The US Bureau of Economic Analysis released its personal consumption expenditure (or PCE) price index today. The PCE index is the Federal Reserve’s preferred gauge of inflation.

JPMorgan Chase (JPM) thinks that gold prices (GLD) should go higher. Right now, the Fed is patient on rate hikes.

While the markets aren’t expecting any changes in rates following the meeting, they’re keenly awaiting the Fed’s strategy to deal with strong economic growth accompanied by low inflation (TIP).

The Federal Reserve’s two main objectives are stabilizing prices and maximizing employment.

Jeffrey Gundlach is very concerned about the increasing debt in the US economy.

The Federal Reserve has two main objectives: price stability and maximizing employment.

When it comes to investing in stocks, Berkshire Hathway’s (BRK.A) chair, Warren Buffett, and Bridgewater’s founder, Ray Dalio, have similar advice.

Out of the investors surveyed, 46% expect global growth to weaken over the next 12 months.

Fed policymakers are watching the job data closely. The data show whether the US economy is strong enough to withstand interest rate hikes.

Wage growth could be the most closely watched component of the US jobs report. Wage growth hasn’t consistently gone in the right direction.

J.P. Morgan (JPM) has one of the most bullish views on Wall Street about the stock market outlook in 2019.

Fed policymakers are watching job data closely, as the data gives the Fed insight as to whether the US economy (SPY) (IVV) is strong enough to withstand interest rate hikes.

Wage growth will likely be the most closely watched component of the US (VOO) jobs report.

A major factor weighing on gold prices this year was the Fed’s tightening cycle.

Another concerning statistic that came to light during the Bank of America Merrill Lynch’s Fund Manager Survey was that investors made the largest ever one-month rotation into bonds (BND).

Last month, Goldman Sachs predicted the S&P 500 (SPY) will reach 3,000 by the end of 2019.

The Federal Reserve Committee plans to meet for the last time in 2018 on December 18–19. The committee is widely expected to raise interest rates (TLT) by 25 basis points, marking the fourth hike this year.

The US jobs report for November was released today.

Wage growth will likely be the most closely watched component of the US (VOO) jobs report.

One question we need to ask ourselves is whether yesterday’s surge in the markets (QQQ)(DIA) is justified. The answer depends on our understanding of Fed Chairman Jerome Powell’s comments.

Bank of America analysts contend that gold prices (GLD) should surge over the next year.

Since equities have slumped in October, investors are reassessing the price they should be paying for the forward earnings.

The US consumer price index (or CPI) for September was released today at 8:30 AM EST. Inflation numbers were weaker-than-expected.

The Dow Jones Industrial Average Index tumbled more than 800 points yesterday as Treasury yields continued their upward march.

For the last few days, the bond markets have seen sell-offs due to stronger-than-expected economic data and hawkish comments from the Federal Reserve.

Increasing interest rates spooked investors again today as US stocks dropped sharply amid rising Treasury yields.

The demand for gold in India (INDA) was lukewarm in the first half of the year, mainly due to stronger equity markets and higher gold prices measured in rupees.

Whether the recent sell-off in the bond and stock markets is just a blip or the beginning of a sustained downward rally will depend on the upcoming US economic data.

The Fed is scheduled to meet on September 25–26. The Fed is widely expected to raise rates by 25 basis points during the meeting.

Job numbers give Fed policymakers clues about whether the US economy (SPY) (IVV) is strong enough to withstand interest rate hikes.

The Fed’s annual economic policy symposium starts Thursday. Fed chair Jerome Powell will speak on “Monetary Policy in a Changing Economy.”

The rupee has depreciated by ~7.0% year-to-date against the US dollar. This event caused local gold prices to rise.

Gold prices (IAU) have been on a losing spree since mid-April due to the US dollar’s strength and diverging monetary policies.

After its June 22 meeting, OPEC decided to increase its output. However, this increase was lower than what the markets expected.

In the May LEI report, the yield spread had a net impact of 0.14 (or 14.0%).

The PPI for final demand in May is reported to have increased by 0.5% month-over-month.

The FOMC’s June statement was released on June 13, and the outlook for inflation remained upbeat.

The US Federal Reserve has a dual mandate of achieving maximum employment and stable prices (TIP) in the economy.

During the Fed’s May meeting, the inflation (TIP) target was described as “symmetric,” suggesting that the 2% target would not be used to initiate any dramatic changes to US monetary policy.

The central banks of the US, EU, and Japan are scheduled to meet this week.

As of June 1, the unemployment rate in the US has dropped to 3.8%—its lowest level in the last 18 years.

Gave believes the disinflationary boom is the natural state of capitalism and shifts to an inflationary boom every 30–40 years.

In the current economic climate, we can expect the Fed to take a step back with respect to interest rate hikes.

As per the May ADP employment report, job growth in the professional and business services sector continued to be the key driver for jobs additions.

The FOMC’s May meeting minutes indicated that some of its members had turned bearish on inflation (TIP).

The most recent FOMC meeting was on May 1–2. At the meeting, the range for the federal funds target rate was left unchanged.

The Conference Board uses average weekly unemployment claims as a constituent of its Leading Economic Index (or LEI).

The US bond markets remained under selling pressure as bond yields, especially at the short end of the curve, continued to shoot up, while the long-term yields remained subdued.