An introduction to TIPS and US CPI derivatives: 2026 update

Research evidence excerpt

An introduction to TIPS and US CPI derivatives: 2026 update

J P M O R G A N Global Markets Strategy

21 July 2026

An introduction to TIPS and US

CPI derivatives

2026 update

US Rates Strategy

Harry Downie AC

(1-212) 270-9500

harry.j.downie@jpmorgan.com

Jay Barry

• The TIPS market remains the largest inflation-linked bond market in the world, (1-212)john.f.barry@jpmorgan.com834-4951

with $2.2tn outstanding—larger than the UK and Euro area linker markets

Liam L Wash combined

(1-212) 834-5230

• We provide an overview of the TIPS market and the mechanics of inflation- liam.wash@jpmchase.com

adjusted cash flows, including considerations around CPI seasonality, the Amanda Berke

embedded floor option, the drivers of inflation breakevens, and the sources of (1-212) 834-5739

demand in the market. We also discuss inflation derivatives, including zero- amanda.berke@jpmorgan.com

coupon swaps, asset swaps, and options J.P. Morgan Securities LLC

• Gross issuance is likely to total $235bn in 2026, over seven times its 1997 level.

While TIPS have fallen as a share of the Treasury market, Treasury remains

committed to the TIPS program and is likely to maintain TIPS allocations as

a moderate proportion of the debt stock

• TIPS breakevens reflect not only inflation expectations, but also inflation risk

premium and liquidity premium components. We model the fair value of

seasonally- and carry-adjusted breakevens based on commodity prices,

implied volatility (VIX), economists’ inflation expectations and the expected

forward path of Fed policy

• Private rather than official investors have become the dominant holders of

TIPS. We expect the Fed’s share of the TIPS market to continue to decline as

the Fed shifts the duration of its portfolio lower by increasing its bill share.