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TIPS




Treasury inflation-protected securities (TIPS) are inflation-indexed bonds issued by the U.S. Treasury. The rate of return is adjusted to the consumer price index (CPI) as a measure of current inflation.


Additional Comments:

The coupon rate is determined at auction like other Treasury securities, but have a yeild generally lower than T-Bonds or notes.

The advantage to TIPS is that you are generating a real rate of return because the coupon rate is adjusted to account for inflation. This protects the bond holder against the negative effects of inflation over the term of the bond.

TIPS are currently offered in 5-year, 10-year, and 20-year maturities. TIPS have an active secondary market as well, and in periods of low interest rates and/or expectations for increasing inflation, these bonds can be very popular.

Related Terms:

Treasury Bond
U.S. Treasury bonds, also known as long bonds, are issued in 30-year terms.The T-bond is ...

Treasury Note
Treasury notes are issued in terms of 2, 3, 5, 7, and 10 years. T-notes, ...

Treasury Bill
The Treasury bill, or T-bill, is a zero coupon bond issued for terms of one month ...





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