How to buy TIPS

Two venues: new bonds at Treasury auction, or existing bonds on the secondary market. For most ladder builders the answer is auctions through a brokerage account, which cost nothing extra and take about two minutes per order.

Auction or secondary market?

Auctions are the default. You pay exactly what every institution pays at the same clearing yield, with no bid-ask spread, in $1,000 increments. The tradeoff is the calendar: each maturity only comes up a few times a year, so a specific rung may mean waiting a few months or buying its nearest neighbor.

The secondary market trades every outstanding TIPS every business day, which is how you fill a specific maturity immediately. You pay a spread for the convenience, modest on large liquid issues and wider on small lots of older bonds. Secondary prices also carry the accrued inflation adjustment, so a "$98" quote settles at the quoted price times the bond's index ratio; your brokerage shows the true settlement amount before you confirm.

The auction calendar

The Treasury auctions each tenor on a repeating annual pattern: 10-year TIPS with new issues in January and July and reopenings in most other odd months, 5-year TIPS with new issues in April and October plus reopenings, and the 30-year with a February new issue and an August reopening. A reopening sells more of an existing bond and works identically for a buyer. The authoritative dates are on the Treasury's tentative auction schedule, published quarterly; the 2037-2039 gap years fill through the 2027-2029 ten-year auctions.

Buying at a brokerage: the actual steps

At Fidelity, Schwab, or Vanguard the flow is the same shape: find the bond or fixed income section, choose Treasury auctions, pick the announced TIPS, enter a quantity in thousands, and place a noncompetitive bid. Noncompetitive means you accept the auction's clearing yield, which is what you want; competitive bidding is for dealers. Orders close the morning of the auction, settlement is a few days later, and there is no commission at any of the three.

One setting deserves attention: auto-roll. Fidelity in particular defaults to reinvesting maturing Treasuries into new ones, which quietly un-builds a ladder as rungs mature. Turn it off for ladder positions; as of our last check that meant a phone call rather than a click.

TreasuryDirect: when it makes sense

TreasuryDirect sells the same auctions with no account minimums, and it is where I Bonds live. Its limits matter for ladders, though: it cannot sell a TIPS before maturity (you must transfer the bond out to a brokerage first), it cannot hold IRAs, and the interface shows less than any brokerage does. Since brokerage auctions are free, TreasuryDirect is best reserved for I Bonds and for taxable-account buyers who are certain they will hold to maturity.

Mistakes to skip

Buying a TIPS fund when you meant to lock a real yield: funds have no maturity date, so they never hand back your principal. Ladder rungs in a taxable account without understanding phantom income. And waiting for a marginally better auction while an attractive real yield sits on the table today; the yield you lock is the one that matters, not the week you locked it.