Definition of Treasury Inflation Protected Securities (TIPS)

United States Treasury securities issued at a fixed rate of interest but with principal adjusted every six months based on changes in the Consumer Price Index. At maturity, TIPS, which are issued in January and July as 10-year and 30-year notes, and in October as 30-year bonds, are redeemable either at their inflation-adjusted principal or their face value, whichever is greater. TIPS sacrifice some yield as a tradeoff for the inflation protection and the inflation adjustment is federally taxable annually, although not paid out until maturity.