A type of treasury (treasury security) that is issued to investors who seek a certain type of protection against inflation. To that end, treasury inflation protected securities (TIPS) are issued (usually for a term of 5, 10, or 30 years). Unlike standard treasury securities, where the principal is fixed, the principal of a TIPS can change, up and down, over its maturity. When the TIPS matures, if the principal is higher than its original level, the holder will receive the difference. If the principal is equal to or lower than the original amount, the investor will only get the original amount.

TIPS pay a fixed rate of interest every six months until maturity. Interest payment depends on a changing principal. Principal changes to reflect and account for changes in inflation (official figures) over the term of a TIPS. Hence, the amount of interest payment also varies accordingly.