Behind the Yield
Behind the Yield: October 9, 2025
Why You’re Hearing So Much About TIPS. 10/10/2025
Why You’re Hearing So Much About TIPS. 10/10/2025
TIPS are having a moment.
Having been the afterthought of the last decade, Treasury Inflation Protected Securities have been reappearing in the commentary of strategists, in flows into funds, and in portfolio reviews once again. It is not coincidental. It is what you get when math, macro, and psychology all go the same direction.
1️⃣ Real Yields Are Finally Real
The 10-year TIPS yield is roughly two percent. It's not very glamorous, but it is the highest sustained real yield in nearly two decades. For bond investors, that means something simple and persuasive: the bond market is back at rewarding a real return above inflation.
When the real yields turn positive, the TIPS cease being a niche inflation play and become akin to an income-streaming core holding. They no longer require the inflation shock in order for them to be included in a portfolio. The coupons and principal changes accumulate incrementally all on their own.
That alone explains why practitioners are paying attention. TIPS have gone from theoretical to functional.
2️⃣ Sticky Inflation Meets Softer Growth
Inflation is no longer raging, but it is not about to cease either. Core services, housing, and wage growth keep it just shy of three percent. Meanwhile, growth indicators remain soft, and the market is already factoring in next year's rate reductions.
That pairing is TIPS' bread and butter. If nominal yields drop as inflation expectations remain solid, real yields are lowered and the price of TIPS goes up. Income is collected and price appreciation is captured concurrently.
It is a setup where cash starts to lag, gold looks tired, and TIPS quietly do their job.
3️⃣ The Clean Hedge in a Confusing World
Traders also favor TIPS because they specifically hedge inflation. They are anchored in the Consumer Price Index, not sentiment. You don't need a crisis, a misstep by the central bank, or a collapse in the dollar in order for them to pay out. You simply need inflation running higher than that which the market is expecting today.
At a time when global supply chains are resetting and deficits are swelling, that direct linkage looks appealing. TIPS are the purest expression of inflation protection that still fits comfortably inside a traditional fixed income allocation.
4️⃣ The Gold Comparison
Gold has already done its job for this cycle. It has been the emotional hedge, the asset investors buy when confidence wobbles. TIPS are the rational alternative. They hedge the same inflation risk, but with income and transparency instead of faith.
TIPS will adjust on the fly and reward investors to hold back if inflation drifts back up again. Gold will need another dose of fear to rise again. In times like these, that margin matters.
5️⃣ How Advisors Should Think About Them
TIPS belong back in the portfolio, not as a tactical trade but as part of a strategic allocation in the Treasury sleeve. The five to seven year time frame gives the best combination of inflation sensibility and manageable duration. For ladder construction, individual TIPS can be customized to client obligations. For broader sector exposure, ETFs like SCHP or VTIP offer convenient access.
The determinant is breakeven inflation. Right now, the market is forecasting long-term inflation in the vicinity of 2.2 percent. If you figure it will be higher, TIPS get a seat at the table.
Client takeaway:
Real yields are real again, and that changes everything. TIPS hedge inflation, compound quietly, and don’t need fear to work. In a world that’s still figuring out what “normal” inflation looks like, that’s the kind of hedge worth owning.
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