Barclays launches Tips income index family as inflation increases

Barclays Capital has rolled out a new suite of indexes designed to give investors a direct hedge against inflation. The new products arrive as inflationary pressures increase, with the US Consumer Price Index (CPI) either rising or flat in each of the past six recorded months.

The new launches track the price of US Treasury Inflation Protected Securities (Tips), US government bonds that mirror changes in the CPI. They are designed to offer protection against inflation in the dollar, which can erode the value of regular government bonds.

Two indexes have been constructed: the Barclays Capital US Tips Real Income 2019 Index, and another version that incorporates 2029 maturity Tips. Each will pay income on a monthly basis. They are powered by an algorithm designed by fund manager Pimco, which has a patent pending on the formula, according to BarCap.

The US CPI has fallen 1.3% over the past 12 months, but rose 0.4% in August and 0.2% in September, with October data to be released shortly. Fears over inflation have risen on the back of cash injections into the economy and the expected rise in interest rates in the US and Europe.

The bank will launch structured notes and other offerings referencing the new launches depending on what there is client demand for, says the bank.