TIPS Thrive As Inflation Worries Linger


	TIPS Thrive As Inflation Worries Linger

rmowery

6-30-2006 9:46 PM

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tags:

finance, investment, money, bonds, tips, interest rate increase

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<div style="margin: 12px 0px; font-family: arial; color: #333333; background: #ffffff; border: solid 4px #e5e5e5; width: 100%; clear: left;"><div class="CM_CTB_Content_Wrap" style="margin: 0px; padding: 0px;background-color: #ffffff;"><div style="border-bottom: solid 1px #dcdcdc; white-space: nowrap; margin-bottom: 8px; background-color: #eeeeee ;background-image: url(http://clipmarks.com/images/source-bg.gif); background-repeat: repeat-x; height: 24px; line-height: 24px; vertical-align: middle; padding-bottom: 4px; color: #666666; font-size: 10px;" ><a href="http://clipmarks.com/clip-to-blog/" title="see clips that are hot right now"><img src="http://content.clipmarks.com/blog_embed/a099e66c-64bb-42e2-85c2-2a4bc084bf21/EB36FF10-6873-4823-A2EE-E3E5BC64EC44/" alt="" width="19" height="19" border="0" style="vertical-align: middle; margin: 0px 4px; display: inline; border: none; float:none;" /></a>clipped from <a title="http://news.moneycentral.msn.com/provider/providerarticle.asp?feed=AP&Date=20060630&ID=5838917" href="http://news.moneycentral.msn.com/provider/providerarticle.asp?feed=AP&Date=20060630&ID=5838917" style="font-size: 11px;">news.moneycentral.msn.com</a></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://news.moneycentral.msn.com/provider/providerarticle.asp?feed=AP&Date=20060630&ID=5838917"><H1>TIPS Thrive As Inflation Worries Linger</H1></blockquote><div style="height: 2px; font-size: 2px; background: #dcdcdc; border-bottom: solid 1px #f5f5f5; margin: 2px 4px;"></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://news.moneycentral.msn.com/provider/providerarticle.asp?feed=AP&Date=20060630&ID=5838917"><P>NEW YORK (AP) - Federal Reserve Chairman Ben Bernanke is still worried about inflation ripping through the economy. That suits some investors just fine.</P></blockquote><div style="height: 2px; font-size: 2px; background: #dcdcdc; border-bottom: solid 1px #f5f5f5; margin: 2px 4px;"></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://news.moneycentral.msn.com/provider/providerarticle.asp?feed=AP&Date=20060630&ID=5838917"><P>Holders of inflation-indexed Treasury bonds known in the market as TIPS benefit when inflation looms. The securities act like a sanctuary for investors' portfolios, hedging them as inflation, or even concerns about inflation, begin to erode stock and bond portfolios.</P></blockquote><div style="height: 2px; font-size: 2px; background: #dcdcdc; border-bottom: solid 1px #f5f5f5; margin: 2px 4px;"></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://news.moneycentral.msn.com/provider/providerarticle.asp?feed=AP&Date=20060630&ID=5838917"><P>Those who invest in the securities get not only a fixed coupon payment, but also extra interest payments that grow in tandem with the government's Consumer Price Index. The face value of the bond also increases with inflation. If the CPI rises a half percent, the value of TIPs makes the same increase.</P></blockquote><div style="height: 2px; font-size: 2px; background: #dcdcdc; border-bottom: solid 1px #f5f5f5; margin: 2px 4px;"></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://news.moneycentral.msn.com/provider/providerarticle.asp?feed=AP&Date=20060630&ID=5838917"><P>If inflation is TIPS' best friend, then attempts to slow the economy by raising interest rates are its worst enemy. Increasing interest rates by 1 percentage point would cause the price of a TIP to fall by about 8 percent.</P></blockquote></div><div style="margin: 0px 6px 6px 4px;"><table style="font-size: 11px;border-spacing: 0px;padding: 0px;" cellpadding="0" cellspacing="0" width="100%"><tr><td style="background:transparent;border-width:0px;padding:0px;">&nbsp;</td><td align="right" style="background:transparent;border-width:0px;padding:0px;width:107px" width="107"><a href="http://clipmarks.com/share/EB36FF10-6873-4823-A2EE-E3E5BC64EC44/blog/" title="blog or email this clip"><img src="http://content8.clipmarks.com/images/c2b-foot.png" border="0" alt="blog it" width="107" height="17" style="border-width:0px;padding:0px;margin:0px;" /></a></td></tr></table></div></div>