The "growing pains" of TIPS issuance

Jennifer E. Roush

No 2008-08, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper provides updated calculations of the relative cost to the U.S. Treasury of previously issued TIPS by comparing the payment stream on each security to that of hypothetical nominal counterpart. While the costs of the program (so measured) are large, totaling $5 to $8 billion to date, I show that they owe largely to market illiquidity in the early years of the program. Indeed, absent these market growing pains, the program would have yielded a substantial net savings to the government as investors were apparently willing to pay a substantial premium to insure against inflation risk.

Keywords: Inflation-indexed; bonds (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fmk
Date: Written 2008
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