TIPS Offering Cheap Inflation Protection, RBC’s Latter Says
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U.S. inflation-protected debt is attractive as the risk that the global economy is returning to recession overtakes concern simulative monetary policies will boost consumer prices, according to RBC Global Asset Management’s Gordon Latter.
Investors have reduced their expectations for inflation as measured by the difference in yields on Treasury Inflation-Protected Securities, or TIPS, and Treasuries to almost the lowest level since October 2010. The break-even rate on 10-year securities has dropped to 2.02 percent from a high this year of 2.67 percent reached on April 11.