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The ten year Treasury TIPS yield 0.812% while the ten year Treasury bond has a yield...

The ten year Treasury TIPS yield 0.812% while the ten year Treasury bond has a yield to maturity of 2.6%. Please explain why there are differences between yields of these two bonds both issued by the Department of Treasury.

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Answer #1

TIPS means Treasury Inflation Protected Security.

The Yield between both the types of Bonds is different BECAUSE, the Value of the TIPS will be ADJUSTED FOR INFLATION.

The Difference between the Yields is the Protection provided by TIPS.

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