PIMCO 15+ Year US TIPS Index Exchange-Traded Fund

LTPZ

Market cap $709M

The PIMCO 15+ Year U.S. TIPS Index ETF (LTPZ) offers targeted exposure to long-term U.S. Treasury inflation-protected securities, emphasizing sensitivity to long real rates. LTPZ's performance is driven by both price movements from real rate changes and inflation carry, with high real duration amplifying rate impacts. Current macro indicators for LTPZ are neutral: long real rates and inflation carry provide a modest cushion but lack strong directional momentum.

Bonds are in a bear market, but TIPS offers compelling inflation protection and is overlooked by many investors. I strongly favor the PIMCO 15+ Year U.S. TIPS Index ETF for long-term inflation hedging, citing its low fees and focus on long-dated TIPS. LTPZ has suffered a steep price decline since 2021, but I expect a recovery as inflation concerns persist and demand for TIPS rises.

Gold has surged due to inflation fears, but Treasury Inflation-Protected Securities offer a better hedge against inflation for investors. TIPS, introduced in 1997, adjust their principal based on the Consumer Price Index, providing protection against inflation with lower yields than regular Treasuries. Long-maturity TIPS, especially the PIMCO 15+ Year U.S. TIPS ETF, can generate capital gains and higher income if inflation rises.

Treasury Inflation-Protected Securities offer a great risk-reward outlook, with PIMCO 15+ Year U.S. TIPS Index Exchange-Traded Fund ETF now yielding 2.4%. LTPZ ETF tracks the BofA Merrill Lynch 15+ Year US Inflation-Linked Treasury Index, suitable for long-term investors or speculators betting on falling real yields. Potential drivers for LTPZ upside include fading US growth optimism, widening fiscal deficits, and potential equity market corrections.

LTPZ ETF is designed to track an index of long-term TIPS or Treasury Inflation-Protected Securities. Stricter immigration controls, tariffs, and increasing money supply could drive another inflation wave, making long-term TIPS a valuable tool in the future. LTPZ ETF excels in low-interest, high-inflation scenarios, offering solid income during stagflation but unsuitable for steady income seekers.

Treasury Inflation-Protected Securities, a.k.a TIPS funds, have had mixed results due to duration weakness during a rate hike cycle, but long-duration TIPS may make sense now. PIMCO 15+ Year U.S. TIPS Index Exchange-Traded Fund ETF targets long-maturity TIPS exposure, providing inflation protection and real returns. The LTPZ ETF offers a valuable hedge against inflation, but may be more volatile and lack diversification compared to shorter-maturity TIPS funds.

Long-term Treasury Inflation-Protected Securities (TIPS) are underpriced and a better component of a 60/40 portfolio than unhedged Treasuries. Simulated historical returns suggest long-term TIPS are a powerful hedge against high inflation and long-term bear markets in equities. The next two decades are likely to see higher inflation and an increased probability of a long-term bear market in equities.

The PIMCO 15+ Year U.S. TIPS Index is highly sensitive to changes in real interest rate expectations, and surging stocks have undermined rate cut bets, weighing on the ETF.

Investors looking to adjust their allocations may want to add Treasury Inflation-Protected Securities, or TIPS, to their fixed income portfolio. At least since the CPI notched a 9% year-over-year increase in the summer of 2022, inflation has been back on investors' minds.

Both nominal and real rates are down across the curve. The catch is that the curve now embeds some very aggressive Fed easing assumptions. Buying long-duration TIPS doesn't offer a particularly attractive risk/reward here.