The Treasury Department will hold its 10 year TIPS auction tomorrow (1/23/2025). The expected yield is 2.132%. TIPS also have an inflation adjustment of principal. The yield is near a historic high.
This is UNITED STATES TREASURY SER A-2035 2.12500% 01/15/2035, CUSIP 91282CML2
The bond may be ordered today from Treasury Direct or via Fidelity (which does not charge a commission). Fidelity is more convenient for record keeping. The auction interest rate is set by the large banks that are allowed to bid on the issue and then small investors get that rate.
It is best to hold TIPS in an IRA because the increase in the value of principal is taxed as ordinary income, similar to interest in a bank CD.
If inflation turns out to be higher than expected in the next 10 years the return from the TIPS will be higher than the comparable 10 Year Treasury. The current 10-Year Breakeven Inflation Rate is 2.38%.
Wendy