The Federal Reserve is engaged in a well-documented battle with high inflation. So, many advisors and fixed income investors are evaluating Treasury inflation-protected securities (TIPS) and related ETFs.
That group includes the Invesco 0-5 Yr US TIPS ETF (PBTP). The fund turned nine years old in September and tracks the ICE BofAML 0-5 Year US Inflation-Linked Treasury Index. It’s 25 holdings must have maturities of at least one month but no more than five years.
At a time when investors are searching for income and inflation protection, the $244.8 million PBTP may be ready for its turn in the bond ETF limelight.
“They’re (TIPS) very, very low risk on the credit front. And like a lot of Treasury bonds, they’re issued in different maturities,” noted Morningstar’s Daniel Sotiroff. “So, typically five, 10, or 30 years is what the Treasury will issue them in. And then obviously as time goes on, their maturity is going to wind down. So, you can find stuff out there on the secondary market at a shorter maturity or a shorter time till they terminate.”
TIPS ETF PBTP Is Pertinent Today
Arguably unheralded among TIPS ETF, PBTP merits more attention in the current. That’s because it checks a variety of desirable boxes. For example, investors want to strike the delicate balance of mitigating interest rate risk while maintaining solid income streams.
PBTP delivers on those fronts, as highlighted by an effective duration of just 2.32 years and a 30-day SEC yield of 4.05%. Those benefits are delivered with a portfolio where all of the components are rated “AA.” That confirms credit risk is minimal with this ETF.
