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Treasury Inflation-Protected Securities (TIPS)

QUOTE AND NEWS
Treasury says investors flock to TIPS auction
MarketWatch  Oct 26  Comment 
The results of the Treasury Department's auction of nearly $7 billion in 5-year Treasury inflation-protected securities Monday showed healthy appetite for these securities. The Treasury awarded $6.76 billion in TIPS at 0.769%. The auction was a...
TIPS Master Cues Up a Forecast
Wall Street Journal  Oct 21  Comment 
One of the world's biggest investors in Treasury inflation-protected securities said the supply of such issues is likely to top $100 billion next year as the U.S. ramps up sales to fund budget shortfalls.
TIPS Master Cues Up a Forecast
Wall Street Journal  Oct 20  Comment 
One of the world's biggest investors in Treasury inflation-protected securities said the supply of such issues is likely to top $100 billion next year as the U.S. ramps up sales to fund budget shortfalls.
Treasurys fall after $7 billion auction
CNNMoney.com  Oct 5  Comment 
Treasurys fell Monday after the government received strong demand for its sale of $7 billion worth of 10-year Treasury Inflation Protected Securities.
How and Why to Buy Treasury Inflation-Protected Securities (TIPS)
Saving to Invest  Sep 28  Comment 
With double digit inflation looming on the horizon thanks to the extraordinary increase in the money supply from all the government spending on stimulus and bailouts, many investors are rushing into purchasing "inflation protection" via Treasury...
Fidelity's target-date funds to pare U.S. stocks
MarketWatch  Sep 23  Comment 
Fidelity Investments said Wednesday that its retirement-focused Freedom Funds will boost their international stock-fund allocation to a target of 30% from 20%, paring U.S. stock funds in the process. In addition, the Boston-based mutual-fund giant...
[$] TIPS Show Shift in Wagers Toward Recovery
Wall Street Journal  Sep 13  Comment 
Despite few signs of price pressures, government securities that allow investors to hedge against the risks of inflation have outperformed nominal Treasurys this year.
[$] U.S. to Sell More TIPS
Wall Street Journal  Aug 6  Comment 
The Treasury will expand sales of inflation-protected bonds to ensure demand from China and other investors.
[$] U.S. to Sell More TIPS
Wall Street Journal  Aug 5  Comment 
The Treasury will expand sales of inflation-protected bonds to ensure demand from China and other investors.
[$] Treasury Prices Fall as Supply Looms
Wall Street Journal  Jul 28  Comment 
Treasurys slid despite a decent auction of 20-year Treasury inflation protected securities, with several more hefty note sales ahead this week.
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Sr. Director
Waseem Alim


Treasury Inflation-Protected Securities, or TIPS, are bonds issued by the US Treasury which provide investors with protection against inflation. They are offered in maturities of 5, 10 and 20 years.

The principal on these securities are adjusted based on the Consumer Price Index, which is a measure of inflation. For example: Suppose inflation rate is 2%. If an investor bought TIPS worth $1000 and held it for a year, his principal would have grown by 2% to $1020.

Upon maturity, the TIPS pay back the adjusted principal or the original principal, whichever is greater. TIPS also pay interest twice a year at a fixed rate. However, the interest is paid on the adjusted principal, and as a result increases with inflation and decreases with deflation.[1]

TIPS are useful in determining the expected inflation. The difference between the yield of normal Treasury bonds and the yield of TIPS is a good indicator of the market's inflation expectation.

TIPS can be bought from Treasury Direct.

References

  1. ↑ TreasuryDirect.gov, Retrieved November 17, 2008

[1]

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