Inflation Jump Cost U.S. Treasury $113 Billion in TIPS Payments
- Contrasts with drop in regular Treasuries’ debt-service costs
- TIPS’ cost to government rises with consumer price index
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The current surge in inflation isn’t just hurting household finances. The U.S. Treasury had to shell out some $113 billion in extra payments on debt securities tied to the consumer price index.
Treasury inflation protected securities, or TIPS, pay investors not only a regular coupon as do other notes and bonds, but also offer compensation for higher consumer prices. That means when the CPI climbs, the federal government’s interest costs also rise.