T. Rowe Price Inflation Protected Bond Fund (PRIPX)
Ticker Symbol:
PRIPX
Fund Status:
Open to new Retail investors  /  Open to subsequent Retail investments
Fund Management
Fund Manager*
  • Daniel O. Shackelford
  • Managed Fund Since: 2002-10-31
  • Joined Firm On 1999-03-15 00:00:00.191**
  • B.S., University of North Carolina at Chapel Hill; M.B.A., Fuqua School of Business, Duke University

*Investment manager T. Rowe Price Associates
**Firm refers to T. Rowe Price and Affiliates
Quarterly Commentaries
as of Wed Jun 30 00:00:00 EDT 2010

U.S. bonds performed well in the second quarter, adding to their gains for the year. The Federal Reserve cited the slowing economic recovery for delaying raising the fed funds target rate until late this year or 2011. Credit spreads, the yield difference between Treasuries and riskier bonds, widened as higher-risk bonds lagged higher-quality issues. Treasuries, including Treasury inflation protected securities (TIPS) bonds slightly exceeded the Barclays Capital U.S. Aggregate Index, a broad measure of domestic taxable investment-grade bonds.

The Inflation Protected Bond Fund returned 3.78% in the second quarter compared with 3.82% for the Barclays Capital U.S. TIPS Index and 3.25% for Lipper Treasury Inflation Protected Securities Funds Average. For the 12-month period ended June 30, 2010, the fund returned 9.90% versus 9.52% for the Barclays index and 9.63% for the Lipper average. The fund's expense ratio was 0.69% as of its fiscal year ended May 31, 2009.

For up-to-date standardized total returns, including the most recent month-end performance, please click on the Performance tab, above.
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will vary and you may have a gain or loss when you sell your shares.

Benchmark Definitions

Short-term inflation expectations have receded, and we have taken the opportunity over the last quarter to rebuild our holdings in TIPS. Consistent with our theme to deploy some assets outside of the U.S., we added exposure to currencies that we think will strengthen relative to the U.S. dollar and the euro. We have moved the fund's duration shorter relative to its benchmark, making the portfolio less sensitive to interest rate changes. Given the current low levels of real rates, we are currently maintaining a defensive posture and carrying less risk than the benchmark.

The recession and the ensuing debt crisis have ratcheted down growth prospects and the likelihood of near-term inflation. At the Fed, policymakers appear comfortable with the current inflation rate, but they are mindful that the global recovery will increase inflationary pressures. Once the Fed is convinced the recovery has traction, it is likely to act to keep inflation in check by raising interest rates. Such a move will impact real rates as well. We believe the case for maintaining a TIPS allocation remains valid, but we do not expect to see the blistering returns that we saw through 2009.

See Glossary for additional details on all data elements.