Lock in attractive real yields with this inflation-protected investment, says UBS

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U.S. Treasury Bonds Notícia

Inflation,Bonds,U.S. 10 Year TIPS

After UBS upgraded 5-year TIPS to most preferred in August, the firm is now recommending to move further out the curve.

Investors can lock in some juicy real yields with Treasury inflation-protected securities, according to UBS. After upgrading 5-year TIPS in August to most preferred and seeing them outperform 5-year nominal Treasurys this year, the bank now recommends moving out the curve to the 7-year to 10-year areas . With TIPS, the principal portion rises and falls alongside the movement in the consumer price index for all urban consumers.

Treasury yields are expected to decline when the Federal Reserve starts reducing the fed funds rate. Investors earlier this year had anticipated multiple rate cuts in 2024, but those expectations have since changed. They now only expect one rate cut by the end of 2024 , according to the CME FedWatch Tool . Fed officials have repeatedly said they don't expect to decrease rates until inflation nears the central bank's 2% goal.

 

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