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iShares TIPS Bond Message Board

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  • lo_octane lo_octane Dec 30, 2012 10:54 PM Flag

    How will the new way of calculating CPI affect the price of TIPS?

    The TIP ETF currently owns TIPs which were issued with the promise to pay dividends based on the consumer price index. If future TIPs are issued which will pay dividends based on the bogus "chained CPI", then it remains to be seen if the TIP ETF will start buying those bonds and mixing them with its current bond portfolio. If that happens, then it seems like the ETF dividend payouts would begin to decrease over a period of years.
    It is my understanding that the primary reason that chained CPI is being considered is to decrease future cost of living increases in Social Security payouts. I predict the government will find a way to decrease those payouts one way or another. Our elected officials would prefer to reduce payouts without alerting the voters that they (the officials) are a motley collection of weasels. (I say this will complete respect.)

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