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Types of Bonds

Sale and Issuance of Inflation-Protected Securities

Auction schedule.

The U.S. Treasury currently auctions 10-year TIPS on a quarterly basis and has an expanded auction schedule to include semi-annual 5- and 20-year TIPS issuances. Thus, auctions currently occur in January, April, July and October of each year. Specific terms and conditions of each issue are announced prior to each auction. The offering announcement issued by the Department of the Treasury for each new TIPS offering contains the specific details for that offering. Similar to Treasury fixed-principal securities, the Treasury’s Inflation-Indexed Securities are sold at discount, par or at a premium, depending on auction results.

Secondary market trading of inflation-indexed securities.

After original issue, the securities can be bought or sold in what is known as the secondary market at prevailing market prices through financial institutions and government securities brokers and dealers. (See discussion of liquidity risks.)

Minimum denominations.

The securities will be available in denominations as small as $1,000 and multiples thereof.

Payment dates.

The inflation-adjusted principal amount or the original par amount, whichever is greater, will be paid on the maturity date as specified in the offering announcement. Interest is payable on a semiannual basis on the interest payment dates specified in the offering announcement through the date the principal becomes payable. In the event any principal or interest payment date is a Saturday, Sunday or other day on which the Federal Reserve Banks are not open for business, the amount is payable (without additional interest) on the next business day.

Form of ownership.

Ownership of Treasury Inflation-Protected Securities, like fixed-principal Treasury securities, is evidenced through book-entry. That means the issuance and maintenance of these securities are represented by an accounting entry or electronic record and not by a certificate. The securities will be maintained and transferred in the commercial book-entry system at their par amount, i.e., not at their inflation adjusted principal amount.

 

All information and opinions contained in this publication were produced by the Securities Industry and Financial Markets Association from our membership and other sources believed by the Association to be accurate and reliable. By providing this general information, the Securities Industry and Financial Markets Association makes neither a recommendation as to the appropriateness of investing in fixed-income securities nor is it providing any specific investment advice for any particular investor. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and sources may be required to make informed investment decisions.