Ways To Trim Inflation Risk

By Barbara Kiviat

If the economy continues to recover, interest rates and prices are likely to rise. But there are ways to limit inflation's bite. Last week LaSalle Bank rolled out the first inflation-protected certificates of deposit. The five-year CD yields 1.5%, the 10-year 2.5%. The rates trail those of regular CDs, but the principal values change on the basis of inflation. Another new offering: corporate bonds from Household Finance that pay interest at a rate pegged to the consumer price index. The bonds, which are riskier than those issued by the government, yielded 4.71% last week. Brokerages like Charles Schwab offer both products. Or you can opt for the original inflation-protected securities, known as TIPS, issued by the U.S. Treasury, or mutual funds that invest in them, such as PIMCO Real Return Fund or Vanguard Inflation-Protected Securities. --By Barbara Kiviat