Treasury Inflation-Protected Securities (TIPS) are a type of government bond that is designed to protect investors from inflation. TIPS are issued by the U.S. Treasury Department and are backed by the full faith and credit of the United States government.
The principal value of TIPS is adjusted each year based on the rate of inflation, as measured by the Consumer Price Index (CPI). This means that TIPS can provide investors with a hedge against inflation, which can erode the value of traditional bonds over time.
