Disaggregated TIPS: The case for disaggregating inflation-linked bonds
into bonds linked to narrower CPI components
William W. Jennings
ABSTRACT
Investors generally face inflation-linked obligations — a fact contributing to the
popularity of TIPS and other inflation-linked bonds. With TIPS, one characterization
of inflation, the Consumer Price Index, applies to all investors. Investors, however,
face different flavors of inflation. To date, these heterogeneous needs have not
been addressed by the inflation-linked marketplace. The paper describes the case
for and mechanics of splitting TIPS into disaggregated TIPS matched to components
of the Consumer Price Index. Disaggregated TIPS better address investors’ specific
real liabilities.