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SPDR Barclays Capital TIPS (IPE)

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Last Post: 9/29/2012 5:32:22 PM - Followers: 1 - Board type: Free - Posts Today: 0

SPDR Barclays Capital TIPS

The SPDR® Barclays Capital TIPS ETF seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance the Barclays U.S. Government Inflation-linked Bond Index (ticker: BCIT1T).  Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.

Looking to safeguard your portfolio from the potential erosion of purchasing power? TIPS, or Treasury Inflation Protected Securities, were designed to do just that. During inflationary periods, TIPS help protect a portfolio from the declining purchasing power of the US dollar. Introduced by the US federal government in 1997, TIPS are an important addition to the vast array of government debt instruments available today. Backed by the US government, TIPS provide investors with a means to hedge against inflation.


 





Consumer Price Index chart

What are TIPS?Treasury Inflation-Protected Securities (TIPS)

Treasury Inflation-Protected Securities, or TIPS, provide protection against inflation. The principal of a TIPS increases with inflation and decreases with deflation, as measured by the Consumer Price Index. When a TIPS matures, you are paid the adjusted principal or original principal, whichever is greater.

TIPS pay interest twice a year, at a fixed rate. The rate is applied to the adjusted principal; so, like the principal, interest payments rise with inflation and fall with deflation.

You can buy TIPS from us in TreasuryDirect and Legacy Treasury Direct through non-competitive bidding.

Treasury Inflation-Protected Securities (TIPS)

The U.S. Treasury has been issuing Treasury Inflation-Protected Securities (TIPS) since 1997. TIPS provide investors with an investment option that protects against the effects of inflation. Like all marketable US Treasury securities, TIPS are backed by the full faith and credit of the US Government. TIPS are available to individual and institutional investors alike.

Interest payments on TIPS are made semi-annually and are linked to the Consumer Price Index for Urban Consumers (CPI-U). The underlying value of the principal grows at the same rate that prices (as measured by CPI-U) rise. When the principal grows, interest payments grow also since interest payments are a fixed percentage of principal. At maturity, if inflation has occurred and increased the value of the underlying security, Treasury pays the owner the higher inflation-adjusted principal. If, however, deflation has occurred and decreased the value of the underlying security, the investor receives the original face value of the security.

Earnings from TIPS are exempt from state and local income taxes just as other US Treasury notes and bonds. TIPS owners pay federal income tax on interest payments in the year they are received and on growth in principal in the year that it occurs.

Treasury offers TIPS in terms of 5, 10, and 30 years.  US Treasury securities are available directly from us as well as from banks and brokers.


TIPS In Depth How TIPS Are Tied to Inflation

Treasury Inflation-Protected Securities (TIPS) are marketable securities whose principal is adjusted by changes in the Consumer Price Index. With inflation (a rise in the index), the principal increases. With a deflation (a drop in the index), the principal decreases.

The relationship between TIPS and the Consumer Price Index affects both the sum you are paid when your TIPS matures and the amount of interest that a TIPS pays you every six months. TIPS pay interest at a fixed rate. Because the rate is applied to the adjusted principal, however, interest payments can vary in amount from one period to the next. If inflation occurs, the interest payment increases. In the event of deflation, the interest payment decreases.

At the maturity of a TIPS, you receive the adjusted principal or the original principal, whichever is greater. This provision protects you against deflation.

Treasury provides TIPS Inflation Index Ratios to allow you to easily calculate the change to principal resulting from changes in the Consumer Price Index. To learn more about determining how inflation adjustments affect your security, please see TIPS: Rates and Terms.

Methods of Buying TIPS

TIPS are sold in TreasuryDirect and Legacy Treasury Direct, and through banks, brokers, and dealers. NOTE:  One maturity of TIPS, the 30-year TIPS, isn't offered in Legacy Treasury Direct.Effective April 2009, TreasuryDirect permits accounts for both individuals and various types of entities including trusts, estates, corporations, partnerships, etc. See Learn More about Entity Accounts for full information on the new registration types. The price of a TIPS can be less than, equal to, or greater than the face value. For a full discussion of the price of a TIPS, see TIPS: Rates and Terms.

You can bid for TIPS in either of two ways:
1) With a noncompetitive bid, you agree to accept the yield determined at auction. With this bid, you are guaranteed to receive the TIPS you want, and in the full amount you want.
2) With a competitive bid, you specify the yield you are willing to accept. Your bid may be: 1) accepted in the full amount you want if your bid is less than the yield determined at auction, 2) accepted in less than the full amount you want if your bid is equal to the high yield, or 3) rejected if the yield you specify is higher than the yield set at auction.

 

To place a noncompetitive bid, you may use TreasuryDirect, Legacy Treasury Direct, or a bank, broker, or dealer. To place a competitive bid, you must use a bank, broker, or dealer.

Key Facts:

  • TIPS are issued in terms of 5, 10, and 30 years. The 30-year TIPS isn't offered in Legacy Treasury Direct, but is available in TreasuryDirect.

  • The interest rate on a TIPS is determined at auction.

  • TIPS are sold in increments of $100. The minimum purchase is $100.

  • TIPS are issued in electronic form.

  • You can hold a TIPS until it matures or sell it in the secondary market before it matures.

  • In a single auction, an investor can buy up to $5 million in TIPS by non-competitive bidding or up to 35% of the initial offering amount by competitive bidding.


Comparisons

google TIPS vs IPE Chart

 PERF Chart comparing other TIP ETF's


 RISK!

  • Investors should be aware that TIPS may not deliver a perfect inflation hedge because their own personal experience may not match what is proxied in the CPI index. That is, an investor using TIPS to save for a child's college education could be disappointed if tuition grows faster than the CPI. (In Other words... Our Governments lies to us)
  •  

Other Inflation Based Funds Based On TIPS

Western Asset/Claymore Infla (WIA)
Western Asset/Claymore US Treasury Inflation Protected Securities Fund 2 (WIW)
iShares Barclays Treasury Inflation Protected Securities Bond Fund  (TIP)
American AAdvantage Treasury Inflation Protected Securities Fund (ATPIX)
DWS Global Inflation Plus S (TIPSX)
 


LINKS

en.wikipedia.org/wiki/United_States_Treasury_security
 

 

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PostSubject
#22   still a good one zsvq1p 09/29/12 05:32:22 PM
#21   huge drop for this etf zsvq1p 08/17/12 08:16:13 PM
#20   Best ETF these days zsvq1p 07/23/12 02:13:47 PM
#19   still strong! zsvq1p 07/09/12 07:52:20 PM
#18   $.169 divy 11/9/11 zsvq1p 11/10/11 06:56:36 AM
#17   top? zsvq1p 11/08/11 10:14:42 AM
#16   Breakout yesterday maybe... zsvq1p 10/26/11 07:27:33 AM
#15   bull flag zsvq1p 09/29/11 07:50:47 AM
#14   Q&A about the Fed's 'Operation Twist' zsvq1p 09/22/11 07:36:57 AM
#13   The bull continues? zsvq1p 09/19/11 07:46:55 AM
#12   6/6/11 IPE @ .51527 zsvq1p 07/06/11 10:49:02 AM
#11   Still up zsvq1p 05/01/11 10:40:49 AM
#10   Wow... a gap up on this after rate zsvq1p 10/07/10 06:28:15 AM
#9   DVD INFO:09/10/10 @ .011 zsvq1p 09/10/10 10:05:35 AM
#8   Aug Divy .0959 zsvq1p 08/11/10 08:12:31 PM
#7   July Divy .1434 zsvq1p 07/31/10 08:26:06 AM
#6   5/11/2010 IPE SPDR SERIES TRUST BARCL CAP DIVIDEND zsvq1p 06/06/10 09:28:21 AM
#5   Updated Ibox... zsvq1p 04/26/10 11:03:44 AM
#4   maybe i'm wrong zsvq1p 03/29/10 09:32:46 PM
#3   hard to lose on this one... zsvq1p 02/05/10 01:29:47 PM
#2   Still looks good to me.. zsvq1p 01/12/10 12:46:20 PM
#1   A way to beat inflation that may be coming. zsvq1p 12/28/09 09:25:36 AM
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