5 Best Performing Fixed Income ETFs

July 10, 2014

4. Pimco 15+ Year U.S. TIPS Index ETF (LTPZ | C-65)

Total return: +15.05 percent; Effective duration: 23.56 years

LTPZ_perf

LTPZ invests in Treasury inflation-protected securities (TIPS) with at least 15 years remaining in maturity.

Similar to TLT, it is a pure duration play but with inflation protection. However, do not mistake the performance in TIPS as a sign of imminent inflation. It is the spread between nominal Treasury and its TIPS counterpart—the breakeven inflation rate—that is supposed to reflect inflation expectation.

Due to market inefficiencies (liquidity premia and inflation risk premia), the breakeven inflation rate has not been a good forecast of future inflation, especially in inflation over longer horizons.

 

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