Renewed Focus on Inflation

Concerns about inflation are top of mind again, with consumer prices and producer prices rising higher last week. This impacted the bond market as well as commodity prices.

According to the Bureau of Labor Statistics, the headline figure for the Consumer Price Index (CPI) rose to 3.5% year-over-year while core CPI remained at 3.8%. Compared to last month, headline and core consumer prices both increased 0.4%. All readings came in higher than their respective forecasts. The headline figure for the Producer Price Index (PPI) rose to 2.1%, its highest level since April 2023.

Inflationary Impact on Fixed Income ETFs

Earlier in April, the futures market was indicating most investors expected the Fed to restart its rate cutting program in June. However, following the CPI data on Wednesday, expectations for a reduction fell sharply. Meanwhile, the yield on the 10-year Treasury bond had its largest one-day jump in 19 months and was back above 4.5%.

We saw intermediate-term bond ETFs trade with higher-than-normal volume last week. Fixed income ETFs like the iShares iBoxx $Investment Grade Corporate Bond ETF (LQD) and the SPDR Portfolio Intermediate Term Corporate Bond ETF (SPIB) are sought after during times of bond market volatility. While the value of the bonds inside has fallen in 2024 as yields rose, the liquidity of these ETFs appeals to many seeking high-quality fixed income exposure. Meanwhile, the Vanguard Short-Term Inflation Protected Securities ETF (VTIP) was up 0.6% year-to-date as of April 10.

On Thursday April 18, VettaFi will be hosting a Fixed Income Symposium starting at 11am. This three-hour event will give advisors three continuing education credits and great insights. Don’t miss the chance to tap into the community’s expertise.