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TIIS

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TIIS
See: Treasury inflation-indexed securities
Treasury Inflation-Protected Security
A U.S. Treasury security that protects the bondholder from inflation. Most Treasury securities, like most fixed dollar obligations, pay a fixed coupon rate periodically and mature at par. While this carries low risk, it exposes investors to the possibility that the inflation rate will outpace the interest rate represented on the coupon. In order to protect against this, a Treasury Inflation-Protected Security automatically increases its principal according to the inflation rate as tracked by the Consumer Price Index. Thus, while the coupon rate does not increase, the dollar amount paid does. Because TIPS are so safe, they offer a very low rate of return. See also: Real Return Bond.
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In financial markets, the yield spread between ordinary, 10-year Treasury securities and TIIS (Treasury inflation-indexed securities) is 2.
Inflation and prices by Economic Trends
In principle, subtracting TIIS from nominal T-notes of the same maturity should give economists a market-based measure of expected inflation, but these securities have not achieved that goal.
Expected inflation and the TIIS market by Economic Trends
But how accurate are the inflation expectations derived from TIIS data?
Treasury inflation-indexed securities by Economic Trends
 
 
 
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