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As a result, by issuing securities in a segmented TIPS market, the Treasury may keep realized yields on bill and nominal coupon securities lower than they otherwise would have been. The last noteworthy fiscal benefit from TIPS issuance is the fact that it reduces risk to the U.S. government in terms of the variability of its net financial position. The rate of inflation influences both the cost of TIPS and the government’s tax receipts. Thus, some level of TIPS issuance may reduce the variability of the government’s net financial position. This, in turn, should lead to a more regular and predictable pattern of issuance, which should help minimize interest costs. In summary, our analysis of the ex-ante costs of the TIPS program and the more difficult-tomeasure benefits suggests that TIPS issuance provides at least a modest net benefit to the Treasury. So, now I want to turn to a related question: Are there ways to increase the benefits? 6  See Fleming (2002), Krishnamurthy (2002), Laubach (2003). BIS Review 14/2009  5  I would be willing to make two modest suggestions here. First, it may make sense to emphasize longer-dated TIPS issuance rather than shorter-dated issuance. Analytically, the logic goes as follows. Inflation uncertainty is likely to increase at longer time horizons. Thus, investors are likely to pay a greater premium for inflation protection at longer-time horizons. This implies that the cost savings associated with TIPS are likely to be greater for longer maturities rather than shorter maturities.