In this selection, inflation protected ETFs at the front end of the yield curve are set against the iShares 1-5 Year Investment Grade Corporate Bond ETF
In the 'stand-off' between the short-dated inflation protected ETFs and the two Corporate Bond ETFs, market anticipation of the inflation rate is the deciding factor
In the current context, inflationary anticipations may turn out to be overplayed, pulling down the prices of TIPS bonds as their yields surged
If interest rates hikes by the Federal Reserve have indeed reached a top, as investor consensus expects, short-dated inflation linked bonds will reflect changing views early on
Reversing the current trends, an anticipated slowdown in inflationary expectations could be signaled by
- a price increase of ETFs invested in inflation protected TIPS
- front-running the increase in short term corporate bond ETF pricing, such as benchmark IGSB and short-term Treasuries such as SHY
In comparing performance/risk charts over the very short period (2-weeks to 3-months), the current hesitations in the bond market become apparent
A strong economy, implying little change in corporate default rates, would further support a repricing of corporate bonds
Broad-Based Inflation Linked ETFs with bond maturities stretching from 5 years to 10 years on average is a companion theme, published separately for comparison with Short-Dated Inflation Linked ETFs
By controlling for performance of the constituents of the selection over short time frames, going forward, shifts in market anticipations will be highlighted
Check performance and volatility from 2 weeks to 3 months - on tab at top right of your screen