Overview of Treasury Inflation-Indexed Securities
Investor Perspective on TIPS
Unique asset class (dollar-denominated, inflation-protected, full faith and credit of the United States).
- Lower historical correlation with other asset classes leading to portfolio diversification.
- Maintenance of purchasing power of savings.
- Relative low volatility and potentially beneficial inflation adjusted returns.
- Deflation floor, i.e. investors wont receive back less than nominal principal value at maturity.
The TIPS Market
- Worldâ€™s largest inflation indexed securities market.
- Over $550 billion of TIPS outstanding.
- Average daily turnover over $5 billion.
TIPS as Part of Treasurys Funding Strategy
- Nearly 8% of Treasuryâ€™s marketable debt portfolio. 10-year TIPS notes issued quarterly; 5- and 30-year TIPS issued semi-annually.
- Market participants and individual investors can purchase TIPS in denominations as low as $100.
- In addition, investors can purchase Series I inflation-indexed savings bonds.
A complete description of the terms and conditions of TIPS can be found in the Treasury Uniform Offering Circular and the auction announcement for the applicable TIPS on the Bureau of Public Debts website.
Additionally, the Bureau of Public Debtâ€™s website www.treasurydirect.gov contains information on how to buy TIPS through TreasuryDirect, Daily Index Ratios for adjusting the Principal Value of TIPS, a general summary of TIPS mechanics, and information on tax treatment.
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