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They pay a coupon rate (currently 3.94%) each year based upon an inflation indexed principal value (ie the interest payments vary with the CPI). Upon maturity they return the inflation indexed principal amount.

If you hold them in a taxable account, you have to pay taxes on the increase in principal each year. The tax calculation is difficult.

If you hold them in an IRA, the taxes are much cleaner. The standard IRA tax rules hold.

You can buy strips that pay off only at maturity.
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