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CDIPS vs TIPS
Old 12-04-2003, 06:46 PM   #1
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CDIPS vs TIPS

Hi,
ran across info on CDIPS, basically are TIPS in the form of a CD. Maturity is from 3 yrs to 10 yrs. Rate on 3 yr is 1.4%, rate on 10 yr is 2.15%, plus CPI inflation adjustment. Does anyone have any thoughts on these?
Pros & cons? web site below.

(www.lasallecdips.com/)

thanks

earlyout
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Re: CDIPS vs TIPS
Old 12-04-2003, 07:23 PM   #2
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Re: CDIPS vs TIPS

Note that only the deposit amount is FDIC insured:

"If the issuing bank fails before the maturity date, any positive difference between the inflation-adjusted base and the deposit amount may not be eligible for FDIC insurance coverage."

Also, it looks like the whole phantom income problem will follow the CDIPS as with the TIPS.

- Alec
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Re: CDIPS vs TIPS
Old 12-05-2003, 07:59 AM   #3
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Re: CDIPS vs TIPS

Their web page also compares CDIP's and TIPS to other types of inflation adjusted notes. They seem to put CDIPs and TIPs in the same category. The security of the funds sounds comperable (some risk to adjustments not being FDIC insured) as long as you stay under FDIC limits.

I'd say that for all practical purposes CDIPS look like TIPS. Transaction costs would be the tie breaker for me if I was to investigate further.

Wayne
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