US Investor Inflation Fears Through the Lens of the Morningstar Fixed Income Indexes

Global inflation fears drove investor interest in TIPs and long bonds in October, reflected in strong gains for the Morningstar US TIPS & US 10+ Year Treasury Bond Index.

Robust consumer demand, global supply chain issues and a tight labor market have combined to drive up prices worldwide, spurring a record CPI increase in September and stoking inflation fears in the U.S. and abroad. And with the FOMC meeting this week to discuss U.S. monetary policy, Morningstar bond index performance shows the connection between inflation concerns and investor behavior.

In the US, the Morningstar US TIPS index rose 1.19% in October (and nearly 5% year-to-date) as investors poured money into TIPS amid inflation concerns, far outpacing the Morningstar US Treasury Bond Index, which returned just 0.01%. 

October 2021 Index Levels​

Source: Morningstar Indexes. Indexes are not available for direct investment.

The Morningstar US 10+ Year Treasury Bond Index also had a strong October, outperforming its shorter-term counterparts as yields cooled on the longer end of the curve reflecting continued investor uncertainty about economic growth and inflation.

1-Month Total Return (October 2021)

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Source: Morningstar Indexes. Indexes are not available for direct investment.

A similar picture can be found in the UK, where inflation concerns have contributed to a 4.6% rise for the Morningstar UK Inflation-Protected Securities Index in October, far outpacing a 2.3% return for the Morningstar UK Gilt Index. 

Dan Lefkovitz – Index Strategist, Morningstar:

“Investors today must confront the risk that inflation isn't just transitory. After a long period of benign inflation and an equity market dominated by growth stocks, many portfolios aren't fully prepared for an environment of rising prices.”

Katie Binns – Senior Product Manager, Fixed Income Indexes, Morningstar:

“For global bond investors, October offered few answers and a number of surprises when it comes to the global inflation outlook and its impact on markets and investor behavior. Our diversified set of fixed income measures help provide a lens toward greater investor understanding of the dynamics at play in the fixed income market today.”

To speak with Katie Binns or Dan Lefkovitz, contact Tim Benedict at (203) 339-1912 or tim.benedict@morningstar.com. For other recent insights from Morningstar on recent inflation trends, check out Lauren Solberg’s recent blog post. For more information on Morningstar Fixed Income Indexes, go to the Morningstar Indexes website.