This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Top 10 Government and Inflation-Protected Bond ETFs

                            

Investors seeking income often begin with U.S. government bonds as their first choice given perceived safety considerations. It's ironic given recent comments from Moody's for example that the U.S. credit rating may be under review for a downgrade in the next month.

Given this news and the heavy supply of issuance needed to fund government operations its odd yields remain near historic lows. The reason for this is a combination of factors. QE (Quantitative Easing) operations have the Fed buying bond which takes some supply off the market.

This QE is scheduled to end this month. Further, economic data has been weak leaving authorities with little choice but to keep interest rates low. Demographics result in an aging population in the west seeking income over growth. Tied to this has been an outflow of funds from equities to bonds given both demographics and a lack of trust in equities.

We look at 10 different bond ETF sectors including those that are repetitive varying only slightly by holdings and perhaps more so by varying embedded fees and expenses. While we'll look at just 10 issues overall, we'll mention the competitive issue and variance in fee structure.

Large institutions (insurance companies and pension plans) and even smaller asset allocation models either include government bonds as components in portfolio structure with some being mandated to do so. Large institutions use bonds to meet various actuarial table requirements to meet retirement schedules and life insurance tables. Financial Planners and Advisors use bonds traditionally as a portfolio risk management tool given their historical noncorrelation to equity sectors. 

We'll also view popular so-called inflation-protected issues but with some reluctance and caution. These issues, no matter the maturity/duration features are primarily linked to the same inflation measurement--the relative CPI (Consumer Price Index). Personally, I find this linkage to be unfair to the borrower versus the issuer given the flawed nature of the index. It's my opinion, and that of others, these measures understate true inflation. (Shadow Stats does an excellent job of detailing a better view of inflation data.)  Another factor for taxable investors to consider is they must pay ordinary income taxes on the so-called "imputed rate" of interest earned but not paid on the inflation component. Lastly, many institutional investors are required to own these securities by the terms of their mandate and other considerations whereas individual investors need not be so restricted.

1 of 4

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,113.54 +61.81 0.36%
S&P 500 1,983.53 +9.90 0.50%
NASDAQ 4,456.0160 +31.3120 0.71%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs