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Treasury Inflation-Protected Securities TIPS

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Definition of 'Treasury Inflation-Protected Securities TIPS'

These are inflation-indexed bonds issued by the United States Treasury. The principal is adjusted to the Consumer Price Index (CPI), however, the coupon rate is constant.

When the value of the principal is adjusted the coupon value will change by multiplying it by the coupon rate. This protects the bond holder against inflation.

TIPS are currently offered in 5-year, 10-year and 30-year maturities. The United States Treasury replaced the 20-year maturity with the new 30-year maturity in February 2010.

Compare the following Treasury instruments:

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