A New York-based asset manager may make its first foray into Treasury inflation-protected securities and may do it in a big way. Deutsche Bank Private Wealth Management is considering investing up to $600 million, or up to 5% of its $12 billion fixed-income portfolio, into TIPS if spreads on the inflation-pegged bonds widen versus nominal Treasuries.
Gary Pollack, portfolio manager in New York, said he has not previously invested in TIPS because they were too rich but is considering the sector now to diversify his investments and protect them against inflation. Specifically, Pollack said he might make the move if 10-year TIPS widen out to 200-225 basis points. They were at 170bps on Jan. 19. Pollack thinks TIPS will cheapen in the next six months if the yield on the 10-year Treasury hits 5% and the Consumer Price Index reaches 2.5%. They were at 4.17% and 2.1%, respectively, on Jan. 19.
