“The only true inflation hedge are TIPS.
The downside of TIPS is that their prices are already at record highs and their real, inflation-adjusted yields at record lows.
Those who bought into TIPS bonds during their last boom, in 2011-12, quickly saw their price collapse by about 10%, on average, when inflation worries faded.
TIPS offered a pretty good deal when their real, inflation-adjusted yield was about 2%. But today it’s either zero or negative. At this point it’s expensive insurance. The lowest price risk comes from shorter-term bonds (as usual).
But someone buying five-year TIPS bonds is actually locking in a loss of purchasing power of about 1.7% a year between now and 2026.
That sounds to me like a pretty lousy deal, at least unless I really am convinced inflation is about to hit.
MarketWatch 15 March 2021
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