Treasury Inflation-Protected Securities (TIPS)
The U.S. Treasury has been issuing Treasury Inflation-Protected Securities (TIPS) since 1997. TIPS provide investors with protection against inflation. The principal of a TIPS increases with inflation and decreases with deflation, as measured by the Bureau of Labor Statistics Consumer Price Index for All Urban Consumers (CPI-U): U. S. City Average, by expenditure category and commodity and service group (not seasonally adjusted).
When a TIPS matures, the investor is paid the inflation-adjusted principal or original principal, whichever is greater. Since a TIPS investor won't receive less than the original principal, the investor's original principal amount is protected against deflation as well.
TIPS pay interest semiannually at a fixed rate. The rate is applied to the adjusted principal; so, like the principal, interest payments rise with inflation and fall with deflation.
Treasury TIPS auction rules allow for negative real yield bids. See "Information on Negative Rates and TIPS"
- The 5-year TIPS is auctioned as an original issue in April. The 5-year TIPS is auctioned as a reopening in August and December.
- The 10-year TIPS is auctioned as an original issue in January and July. The 10-year TIPS is auctioned as a reopening in March, May, September, and November.
- The 30-year TIPS is auctioned as an original issue in February. The 30-year TIPS is auctioned as a reopening in June and October.
- All TIPS accrue interest from the 15th of the month and are issued on the last business day of the month. For original issue TIPS, accrued interest is payable by the investor from the 15th until the issue date. For reopened TIPS, accrued interest is payable from the dated date on the announcement until the issue date of the reopening.
- All reopened securities have the same maturity date, coupon interest rate, and interest payment dates as the original security but have a different issue date and usually a different price.
For tentative auction dates, see the Tentative Auction Schedule. For scheduled auction dates, see the Upcoming Treasury Marketable Securities Auctions. You may also sign up for e-mail notification of upcoming auctions.
Auction bids for Treasury securities may be submitted as noncompetitive or competitive.
- With a noncompetitive bid, a bidder agrees to accept the yield determined at auction. A bidder is guaranteed to receive the full amount of their bid for a security as long as they are in full compliance with the Uniform Offering Circular (UOC).
- With a competitive bid, a bidder specifies the yield that they are willing to accept for a particular security. This bid may be fully awarded if the yield specified is less than the yield set by the auction, partially awarded if the yield specified is equal to the high yield, or not awarded if the yield specified is higher than the yield set at the auction.
To place a noncompetitive bid in a TIPS auction, individuals and various types of entities including trusts, estates, corporations, partnerships, etc. may use TreasuryDirect. See Learn More about Entity Accounts for full information on the registration types. Individuals, organizations, fiduciaries, and corporate investors may use a broker, or financial institution.
To place a competitive bid in a TIPS auction, a bidder must use a broker, participating financial institution, or have an established TAAPS account.
Adjusting TIPS Principal
Each month, the U.S. Treasury publishes daily index ratios that are used to adjust the principal of TIPS. The index ratios are based on the latest changes to the Bureau of Labor Statistics Consumer Price Index for All Urban Consumers (CPI-U): U. S. City Average, by expenditure category and commodity and service group (not seasonally adjusted). View the Historical Reference CPI Numbers and Daily Index Numbers. The principal of a TIPS increases with inflation and decreases with deflation. For more on calculating the inflation adjustment, please refer to the TIPS section of the Uniform Offering Circular (UOC).
|Original Issue Yield:||The yield determined at auction.
See yields in recent auctions
|Maximum purchase:||Non-competitive: $5 million
Competitive: 35% of offering amount
(see types of bidding)
|Investment Increment:||Multiples of $100|
Redeem, Reinvest, or Sell
Interest on TIPS is exempt from state and local taxes but is subject to federal tax. TIPS investors pay federal income tax on interest payments in the year they are received and on growth in principal in the year that it occurs. Read more about tax considerations.