TIPS

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TIPS

Tip

1. Information on a security, company, or anything else provided by one investor or trader to another that is not available to the general public, that can produce significant profits if it proves to be accurate. See also: Inside information.

2. See: Gratuity.

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.

TIPS

Inflation-protected security (TIPS).

US Treasury inflation-protected securities (TIPS) adjust the principal twice a year to reflect inflation or deflation measured by the Consumer Price Index (CPI).

The interest rate is fixed and is paid twice a year on the adjusted principal. So if your principal is larger because of inflation you earn more interest. If it's lower because of deflation, you earn less.

You can buy TIPS with terms of 5, 10, or 20 years at issue using a Treasury Direct account or in the secondary market. At maturity you receive either the adjusted principal or par value, whichever is greater.

You owe federal income tax on the interest you earn and on inflation adjustments in each year they're added even though you don't receive the increases until the security matures. However, TIPS earnings are exempt from state and local income taxes.

These securities provide a safeguard against deflation as well as against inflation since they guarantee that you'll get back no less than par, or face value, at maturity.

References in periodicals archive ?
Treasury Inflation Protected Securities, bank loans, floating-rate notes, high-yield bonds, precious metals and minerals equities, real estate investment trusts, and commodity-linked investments.
FORT WORTH, Texas, June 30 /PRNewswire/ -- Fort Worth-based AMR Investments, manager of the American AAdvantage Funds, proudly announces the introduction of the American AAdvantage Mid-Cap Value Fund(SM) and the American AAdvantage Treasury Inflation Protected Securities Fund(SM).
The Treasury Inflation Protected Securities (TIPS) Fund will seek inflation protection and income by investing in inflation-indexed debt securities as well as other domestic and foreign fixed income securities.
For example, investors may allocate to Treasury Inflation Protected Securities (TIPS) to offset the impact of inflation.
Though most investors are concerned inflation will rise, only 7 percent currently own Treasury Inflation Protected Securities (TIPS) or TIPS funds which are expected to help investors keep pace with inflation," Davison said.
Treasury Inflation Protected Securities (TIPS): TIPS can create attractive yields but may increase unhedged downside risk if deflation overcomes inflation.
20 /PRNewswire/ -- The American Stock Exchange(R) (Amex(R)) will launch trading in options on Wednesday, January 21, 2004 on the underlying shares of the iShares Lehman US Treasury Inflation Protected Securities Fund (Symbol: TIP).
The iShares Lehman US Treasury Inflation Protected Securities Fund will open with strike prices of 98 through 108 and position limits of 13,500 contracts.
Treasury Inflation Protected Securities Fund 2 (NYSE:WIW) has declared its monthly dividend of $0.
The study showed that people have a real need and desire for products such as mutual funds that invest in Treasury Inflation Protected Securities (TIPS), which are designed to protect their assets from inflation.
Treasury Inflation Protected Securities Fund ("WIA") (NYSE: WIA) and Western Asset/Claymore U.
Treasury Inflation Protected Securities Fund (NYSE: WIA) declared its monthly dividend of $0.

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