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Treasury Inflation-Protected Securities (TIPS)

QUOTE AND NEWS
[$] Leveraged Loans Ramp Up
Wall Street Journal  Jan 15  Comment 
A record number of corporate defaults last year is driving sales of new leveraged loans in 2010, as companies look to this risky debt to support their emergence from bankruptcy.
Treasury sells $10 bln in TIPS at yield of 1.430%
MarketWatch  Jan 11  Comment 
The Treasury Department sold $10 billion in 10-year Treasury Inflation Protected Securities on Monday at a yield of 1.430%, roughly in line with where traders expected the debt to sell, according to CRT Capital Group. The amount is $2 billion more...
[$] U.S. Is Adding TIPS Issues
Wall Street Journal  Jan 10  Comment 
The government is set to ramp up the sale of bonds that provide protection against inflation, with its biggest such offering in five years.
TIPS Give Way to Inflation as Deflation-Adjusted Yields Decline
Bankstocks.com  Dec 21  Comment 
The market for Treasury inflation protected securities is showing Federal Reserve Chairman Ben S. Bernanke won
Long-Term TIPS May Prove Attractive
Wall Street Journal  Nov 24  Comment 
Heightened inflation expectations are driving investors into Treasury inflation-protected securities, and Brian Weinstein sees value in long-term TIPS.
Long-Term TIPS May Prove Attractive
Wall Street Journal  Nov 23  Comment 
Heightened inflation expectations are driving investors into Treasury inflation-protected securities, and Brian Weinstein sees value in long-term TIPS.
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.



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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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