Define: Treasury Inflation-Protected Security

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Definition: Treasury Inflation-Protected Security



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Full Definition of Treasury Inflation-Protected Security


A Treasury Inflation-Protected Security (TIPS) is a U.S. Treasury bond whose interest and redemption payments are tied to inflation. A Treasury Inflation-Protected Security pays a fixed rate of interest, with principal value adjusted semiannually, based on changes in the Consumer Price Index. Consequently, interest payments of a Treasury Inflation-Protected Security may vary. At maturity (5, 10, or 20 years), the Treasury Inflation-Protected Security returns the initial principal to the investor, adjusted for inflation.
Like other Treasury securities, a Treasury Inflation-Protected Security is “backed by the full faith and credit of the United States government” and is exempt from state and local income taxes, but is subject to federal income tax. A gain in principal in a Treasury Inflation-Protected Security is considered reportable income for that year, even though the principal is not distributed until the Treasury Inflation-Protected Security matures.


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Definition Sources


Definitions for Treasury Inflation-Protected Security are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 5th February, 2020