TIPS Inflation-Adjusted Principal Calculator
Adjust the principal of Treasury Inflation-Protected Securities using the CPI index ratio and see the inflation-adjusted coupon.
How it works
Index ratio = current CPI ÷ reference CPI · Adjusted principal = par × index ratio · Coupon = adjusted principal × coupon rate
Treasury Inflation-Protected Securities protect against inflation by scaling their principal with the Consumer Price Index. The index ratio — today’s CPI divided by the CPI at issue — multiplies the original principal, so the amount repaid at maturity grows with prices. The fixed (real) coupon rate is applied to this adjusted principal, so interest payments rise with inflation too, even though the stated rate never changes.
Worked example
A $1,000 TIPS issued when CPI was 250, now with CPI at 265, has an index ratio of 265 ÷ 250 = 1.06. Adjusted principal = 1,000 × 1.06 = $1,060, giving $60 of inflation compensation. At a 1% coupon, each semiannual payment is 1,060 × 0.5% = $5.30.
Sources: Treasury Inflation-Protected Securities (TreasuryDirect)
Frequently asked questions
What happens to TIPS principal if there is deflation?
The principal can fall as the index ratio drops below 1, but at maturity the Treasury pays the greater of the adjusted principal or the original par — so you never receive less than your original principal at maturity.
Is the inflation adjustment taxable before I sell?
Yes. In the U.S. the annual increase in principal is treated as taxable income the year it accrues, even though you do not receive the cash until maturity — the so-called "phantom income" of TIPS.
Why does the coupon payment change if the rate is fixed?
The rate is fixed, but it is applied to the inflation-adjusted principal, which grows over time. A constant real rate on a rising principal produces rising dollar coupon payments.
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Educational estimate, not investment advice. Options and leveraged positions carry substantial risk.