Treasury Inflation-Protected Securities

Treasury Inflation-Protected Securities (TIPS) are government-issued bonds designed to help investors protect against inflation. Their principal value adjusts with changes in the Consumer Price Index (CPI), meaning if inflation rises, the bond’s principal increases. This adjustment ensures that the real value of the investment is maintained over time. TIPS pay interest twice a year based on the current principal, so if inflation goes up, interest payments also rise. At maturity, investors receive the adjusted principal or the original amount, whichever is higher, safeguarding their purchasing power against inflation’s erosion.