Investors looking to secure returns on capital through the mid-2020s now have several sequential bond-based ETFs to consider.
BlackRock has launched five iShares ETFs on the New York Stock Exchange (NYSE) Arca that invest in U.S. Treasury Inflation-Protected Securities (TIPS) of varying maturities.
The five funds include The iShares iBonds Oct 2024 Term TIPS ETF (IBIA), The iShares iBonds Oct 2025 Term TIPS ETF (IBIB), The iShares iBonds Oct 2026 Term TIPS (IBIC), The iShares iBonds Oct 2027 Term TIPS ETF (IBID), and The iShares iBonds Oct 2028 Term TIPS ETF (IBIE). The maturity date for the TIPS for each fund is October 15.
“BlackRock has a strong suite of target maturity ETFs to help advisors and clients manage their duration,” VettaFi’s head of research Todd Rosenbluth, commented on the launch. “It’s great to see them expand the lineup to include TIPS based products too.”
Investors may use TIPS funds to stow away cash, protect against inflation, and manage interest rate risk. They can also map out their fixed income time horizon by constructing a bond ladder (a set of individual CDs or bonds that mature at different intervals).
The Federal Reserve’s historic monetary tightening since the pandemic has seen interest rates rise to the highest levels in decades. This has pushed bond yields up and made fixed-income products much more attractive to investors. It’s uncertain when the Fed’s battle on inflation will become America’s latest “forever war.” Topline inflation ticked higher in August, prompting speculation the Fed’s “higher for longer” scenario may be here to stay.
Tech growth stocks may have been Wall Street favorites in the 2010s, but new economic conditions are shifting the calculus again.
“We’re just starting to see investors come back into fixed income,” Ryan Murphy, head of fixed income business development at Capital Group, told the Wall Street Journal recently. “This appears to be the opening trickle of a potentially much larger shift in the coming years.”
Best Offense is..?
Defensive strategies have been all the rage this year, even as equity valuations have turned skyward amid a bullish recovery.
Investors have been snapping up covered call funds. To meet this demand, ZEGA Finance has launched a new YieldMax suite, which offers buffered exposure to mega-caps. Other covered call stalwarts, like the JPMorgan Equity Premium Income ETF (JEPI), had by August ballooned by around $10 billion year-to-date – the most capital of any active ETF in 2023.
Across the Atlantic, demand for European bond ETFs reached historic highs in the first half of 2023. On a global level, fixed-income ETFs have surged from $729 billion to $1.7 trillion over the past five years. BlackRock sees more gains ahead – the manager forecasts bond ETFs could hit $5 trillion by the end of the decade.
All five of the new iShares funds have an expense ratio of 0.10%.