The 'Growing Pains' of TIPS Issuance

Posted: 15 Jan 2009

See all articles by Jennifer E. Roush

Jennifer E. Roush

Federal Reserve Board - Division of Monetary Affairs

Date Written: February 2009


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: Treasury issuance, inflation risk premium, liquidity premium

JEL Classification: G21

Suggested Citation

Roush, Jennifer E., The 'Growing Pains' of TIPS Issuance (February 2009). FEDS Working Paper No. 2008-08. Available at SSRN:

Jennifer E. Roush (Contact Author)

Federal Reserve Board - Division of Monetary Affairs ( email )

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