- What are TIPS?
- What happens to TIPS if deflation occurs?
- What are the maturity terms for TIPS?
- How do I know when TIPS will be auctioned?
- What are reopenings, premiums, and accrued interest?
- How can I calculate the inflation adjustment to my principal?
- Can I be taxed for TIPS earnings before I receive payment for those earnings?
- How can I place a competitive bid for a TIPS?
- Do you issue TIPS in paper form?
- How do I transfer a TIPS from Legacy Treasury Direct* to TreasuryDirect?
- How often can TIPS be purchased and sold?
What are TIPS?
TIPS -- Treasury Inflation-Protected Securities -- are marketable Treasury securities whose principal is adjusted according to changes in the Consumer Price Index. With inflation, the principal increases. With deflation, it decreases.
What happens to TIPS if deflation occurs?
The principal is adjusted downward, and your interest payments are less than they would be if inflation occurred or if the Consumer Price Index remained the same. You have this safeguard: at maturity, if the adjusted principal is less than the security's original principal, you are paid the original principal.
What are the maturity terms for TIPS?
The maturity terms for TIPS are 5 years, 10 years and 30 years.
How do I know when TIPS will be auctioned?
We auction 5-year TIPS in April, August, and December; 10-year TIPS in January, March, May, July, September, and November; and 30-year TIPS in February, June, and October.
See our Tentative Auction Schedule, which shows auction dates months in advance, or "Offering Announcement Press Releases," which shows auctions that we have officially scheduled. (Auctions are officially scheduled only days before they are conducted.)
Also, you can sign up for e-mail notification of auctions.
What are reopenings, premiums, and accrued interest?
In a reopening, we auction additional amounts of a previously issued security. Reopened securities have the same maturity date and interest rate as the original securities but a different issue date and usually a different price. The cumulative inflation adjustment for a TIPS reopening could be positive or negative.
When you buy a reopened security, you have to pay a premium if the price of the security at reopening is greater than the face value of the security. The price of the reopened security will be determined at auction. Because the security is being auctioned at two separate times, market conditions probably won't be the same and, therefore, the prices likely won't be the same either.
Also, when you buy any reopened security, regardless of its price, you may have to pay accrued interest – interest the security earns from the original issue date of the security until the date we issue the security to you. However, we pay the accrued interest back to you in your first semiannual interest payment.
These TIPS are reopenings: the 5-year TIPS we auction in August and December; the 10-year TIPS we auction in March, May, September, and November; and the 30-year TIPS we auction in June and October.
How can I calculate the inflation adjustment to my principal?
Treasury provides TIPS Inflation Index Ratios to allow you to easily calculate the change to principal resulting from changes in the Consumer Price Index. To determine your inflation-adjusted semi-annual interest payment, simply follow this three step process:
- Locate your TIPS on the TIPS Inflation Index Ratios page. Follow the link and locate the Index Ratio that corresponds to the interest payment date for your security.
- Multiply your original principal amount by the Index Ratio. This is your inflation-adjusted principal.
- Multiply your inflation-adjusted principal by half the stated coupon rate on your security (i.e., 2%). The resulting number is your semi-annual interest payment.
Can I be taxed for TIPS earnings before I receive payment for those earnings?
Yes. If the principal of your TIPS grows in a given year, that growth will be taxed as income in that year, even if your security hasn't matured and, therefore, you haven't received payment of the principal.
How can I place a competitive bid for a TIPS?
To place a competitive bid, you must use a bank, broker, or dealer. (Our system, TreasuryDirect allows only noncompetitive bidding.)
Do you issue TIPS in paper form?
How do I transfer a TIPS from Legacy Treasury Direct* to TreasuryDirect?
To transfer a TIPS from Legacy Treasury Direct to TreasuryDirect, take these steps:
- Open an account in TreasuryDirect. (If you already have an account, you may skip this step.)
- Complete the Legacy Treasury Direct form "Security Transfer Request" (PD F 5179). In the form's section 3, check the box for "Transfer to an Established On-line TreasuryDirect Account Number." Your signature on this form must be certified. Your bank may provide this service.
- Mail the form to the Bureau of the Public Debt, at the address shown on the form.
How often can TIPS be purchased and sold?
Using TreasuryDirect, you can schedule the purchase of a TIPS that will be sold at an upcoming auction. For the months when TIPS auctions occur, see "How do I know when will TIPS be auctioned?"
Using a bank, broker, or dealer, you can buy and sell TIPS at any time.
*Legacy Treasury Direct is being phased out.