Why does TIPS give partial principal deflation protection?

[archived_user]

In a table TIPS is listed as giving inflation protection for both coupon and principal. Further, it is listed as not giving coupon deflation protection, but partial principal deflation protection. Why does TIPS give partial principal deflation protection?

 

[archived_user]

Per the text, TIPS face values are indexed for inflation/deflation and the coupon rates remain the same. The reason for partial deflation protection is because the US Treasury guarantees full payment of the original face regardless of whatever deflation may occur. So, if you purchased at a premium and a deflationary period extended through to maturity, you would receive the original face of the security at maturity (instead of suffering the entire deflationary devaluation).