Glossary term
TIPS (Treasury Inflation-Protected Securities)
US Treasury bonds whose principal adjusts with CPI; the instrument from which real yields are directly observed.
TIPS (Treasury Inflation-Protected Securities) are U.S. government bonds whose principal adjusts with the Consumer Price Index, protecting holders against inflation. The yield on TIPS is a direct, market-observed measure of the real yield, and the gap between TIPS and nominal Treasuries gives the breakeven inflation rate. They are the cleanest instrument for reading the market's real-rate and inflation expectations. See Real Yield and Money Temperature 101.