The yield on the 5-year TIPS was 2.48% on Wednesday afternoon, while the rate on the 10-year TIPS was 2.29%. The par value of the bonds adjusts with inflation, based on the consumer price index for all urban consumers. Duration is a measure of a bond's price sensitivity to changes in interest rates, and as bond prices swooned in 2022, TIPS also suffered. "They're not always the perfect inflation hedge in the short term, and they are very sensitive to changes in market interest rates." Be aware that while there are no state or local taxes on interest, federal taxes apply.

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Persons: Brett Wander, Morningstar, US5YTIPS, Bill Ahmuty, Amy Arnott, They're, Arnott Organizations: Federal Reserve, Schwab Asset Management, Fed, State Street Global Advisors, Morningstar Research Services Locations: TreasuryDirect