Treasury Inflation-Protected Securities (TIPS) are a unique category of U.S. government bonds designed to safeguard investors from inflation. These securities offer a reliable way to preserve purchasing power while benefiting from the backing of the U.S. Treasury. What Are TIPS? TIPS are government-issued bonds whose principal value adjusts with inflation as measured by the Consumer Price Index (CPI). While traditional bonds offer fixed interest payments, the unique feature of TIPS is their inflation adjustment: Principal Adjustments: The face value of TIPS increases with inflation and decreases with deflation. This adjustment ensures the investor’s real return remains protected against rising prices. Interest Payments: The semi-annual interest payments are calculated based on the adjusted principal, meaning that as inflation increases the bond’s value, the interest payments grow as well. Maturity: At maturity, investors receive either the inflation-adjusted principal or the original principal, whichever is higher. This feature protects against possible deflation during the bond’s term. Inflation has reared its head in recent years, increasing the popularity of these securities. Until 2021, many investors hadn’t seen significant inflation since the early 1980s. Take a look at how the