Re:On anti-crypto toxicity
by JumpCrisscross on Wednesday April 20, 2022 @02:19PM
(#31100909)
> from what I'm seeing they're something like 1-2% interest. Inflation is > 8% right now per the government's own numbers
That's a real yield. TIPs "adjust in price (principal amount) in order to maintain their real value" when inflation rises [1].
So if you buy a TIP for 100 that pays 2%, and inflation is 8%, the face value is adjusted to 108 and you get a 2.16 coupon. (Super simplified, to the point of being technically incorrect, but framework-wise fine.)
That's a real yield. TIPs "adjust in price (principal amount) in order to maintain their real value" when inflation rises [1].
So if you buy a TIP for 100 that pays 2%, and inflation is 8%, the face value is adjusted to 108 and you get a 2.16 coupon. (Super simplified, to the point of being technically incorrect, but framework-wise fine.)
[1] https://www.investopedia.com/terms/t/tips.asp