A question on TIPS
 

"TIPS or [treasury inflation-indexed securities] is a special type of Treasury note or bond that offers protection from inflation. Its underlying principal are automatically increased to compensate for inflation as measured by the consumer price index (CPI)."

Does the principle go down in times of deflation? I am assuming not since the principle is returned upon the maturation date. Excuse me for such a simple question [img]/images/graemlins/frown.gif[/img]

Re: A question on TIPS
 

Principle is adjusted down if deflation.

Re: A question on TIPS
 

[ QUOTE ]
Principle is adjusted down if deflation.

[/ QUOTE ]

there is a limit though...you can't owe money (i.e. if deflation occurs for the life of the bond, you are paid your initial principal)

Barron

Re: A question on TIPS
 

[ QUOTE ]
[ QUOTE ]
Principle is adjusted down if deflation.

[/ QUOTE ]

there is a limit though...you can't owe money (i.e. if deflation occurs for the life of the bond, you are paid your initial principal)

Barron

[/ QUOTE ]
Yeah, this was the main point of my question. It's *awkward* that one loses money investing in US bonds.

Re: A question on TIPS
 

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
Principle is adjusted down if deflation.

[/ QUOTE ]

there is a limit though...you can't owe money (i.e. if deflation occurs for the life of the bond, you are paid your initial principal)

Barron

[/ QUOTE ]
Yeah, this was the main point of my question. It's *awkward* that one loses money investing in US bonds.

[/ QUOTE ]

yea you don't owe money.

but deflation is pretty unlikely to happen.

TIPS are far underutilized though as i've mentioned previously.

Barron