Traditional Treasury bonds have a fixed principal and constant payments. Because the principal and coupon rate are fixed, interest rate changes in the economy cause the market price of the bonds to have large fluctuations. On the other hand, the principal of a TIPS increases with the rate of inflation. Similar to a T-bond, the TIPS has a constant coupon rate.  However, since the principal of the TIPS increases over time, the interest payment increases over time. This inflation rate adjustment of a TIPS’ principal every six months reduces the amount of downward price change in the price of the bond when interest rates increase.