From Morningstar: 2025-05-23 05:49:00

Investors are seeking direct hedges against sticky inflation, turning to Treasury Inflation-Protected Treasuries (TIPS) and inflation-linked bond ETFs. Despite European inflation rising, these ETFs have not performed as expected. The relationship between inflation and returns is not linear; market expectations of future inflation drive performance.

In Europe, there are five inflation-linked bond ETFs with Morningstar Medalist Ratings. The iShares € Inflation Linked Government Bond UCITS ETF is the largest, but has lagged its benchmark. Other Eurozone ETFs also show mixed performance relative to their benchmarks and category averages.

Inflation-indexed bonds tie principal and interest to inflation rates. Market value is influenced by interest rates and real rates (interest rate minus inflation rate). These bonds offer capital preservation and protect against unexpected inflation, but are sensitive to interest rate changes.

Investors should consider inflation expectations when deciding on inflation-linked bond ETFs. Products in the Eurozone and UK often have longer durations and are more sensitive to interest rate changes. Assessing fees is crucial for long-term success in these funds.



Read more at Morningstar: Are Euro Inflation-Linked Bond ETFs Worth Investing…