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Treasury Inflation-Protected Securities (TIPS)

QUOTE AND NEWS
Treasury linkers hit nine-month low
Financial Times  May 16  Comment 
The easing of inflation pressures leaves Treasury Inflation Protected Securities looking expensive and is set to increase pressure on investors who bought insurance against the risk of higher consumer prices
[$] A Tipping Point for TIPS?
Wall Street Journal  May 3  Comment 
Investors have been bailing out of Treasury Inflation Protected Securities, but some experts make the case for holding on. Here's what to consider.
Treasury sells $18 billion in TIPS at -1.311%
MarketWatch  Apr 18  Comment 
The Treasury Department sold $18 billion in 5-year Treasury Inflation-Protected Securities Thursday at a yield of -1.311%. Bidders offered to buy 2.18 times the amount of debt sold, compared to an average of 2.56 times at the last 21 sales....
[$] TIPS Investors Rush for Exit
Wall Street Journal  Apr 17  Comment 
A surprise drop in gasoline prices has jolted a corner of the bond market, easing investors' inflation fears and triggering an exodus from Treasury inflation-protected securities, or TIPS.
[$] Shorter-Term TIPS Gain Fans
Wall Street Journal  Mar 10  Comment 
When it comes to inflation protection, not all bonds are created equal. Some investors are shifting toward U.S. Treasury Inflation-Protected Securities that mature within five years, and away from TIPS of 10 years and beyond.
[$] Treasury to Sell $109 Billion
Wall Street Journal  Feb 15  Comment 
The offerings include $9 billion in 30-year Treasury inflation-protected securities.
U.S. sees good demand for TIPS with negative yield
MarketWatch  Dec 20  Comment 
The Treasury Department sold $14 billion in 5-year inflation protected securities on Thursday at a yield of -1.496%, the most negative of seven straight auctions of the securities which has come at a negative yield. Treasury Inflation Protected...
[$] TIPS Sale Draws Mediocre Demand
Wall Street Journal  Jul 19  Comment 
The U.S. government sold $15 billion in 10-year Treasury Inflation Protected Securities at a record-low borrowing cost.
Be Prepared For Inflation, Invest in TIPS
TheStreet.com  May 15  Comment 
Martin Hegarty, co-head of BlackRock's Inflation-Linked portfolios, explains how investments in Treasury Inflation Protected Securities (TIPS) work and can benefit your portfolio.




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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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