TIPS mutual fund returns

[Peter]

I notice that the YTD return for FINPX, the Fidelity TIPS fund, is 5.63%.

How do they do this? Interest rates now are about the same as they were at the start of the year, and YTD CPI inflation is about 2.3%. I must be missing something?

Peter

 

[wabmester]

I notice that the YTD return for FINPX, the Fidelity TIPS fund, is 5.63%.

How do they do this? Interest rates now are about the same as they were at the start of the year, and YTD CPI inflation is about 2.3%. I must be missing something?

2.3 CPI + 2.something real + 1.something for capital appreciation = 5.63

 

[Peter]

Thanks, wabmester. After reading your post I looked more closely at what 10-year interest rates have done. Indeed, they are lower now than at the start of the year, so a significant part of the YTD return is capital appreciation, which I had assumed was near zero.

Incidentally, current YTD return for FINPX is 6.41%. The equivalent Vanguard fund, VIPSX, is 6.84%.

Peter

 

[Roger_R]

I continue to scratch my head at the directions of intermediate or longer bond funds right now, but I think some of the capital appreciation for the TIPS funds has been due to anticipation of rising inflation rates, possibly linked to oil prices?