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With TIPS, you start off with a lower stated yield than regular Treasuries. In July, for instance, 10-year TIPS were yielding around 0.4%, vs. 2.5% for conventional notes. This means that if inflation were to exceed an annual average of 2.1% over the next decade, TIPS investors would earn more -- after their bonds' principal is adjusted for inflation -- than those who hold regular Treasuries.
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