Q. How is the Thrift Savings Plan’s G Fund related to bonds I keep hearing about lately being sold off from other bond funds? How is the G Fund different from these funds? Is this bond fund an inflation-protected bond fund? How does this fund guarantee the principal investment? Who takes the loss if yields on bonds purchased are lower when shares in this fund are transferred than on when those shares were bought?
A. The G Fund is backed by the federal government and accrues interest equal the weighted average interest rate for all outstanding U.S. Treasury debt. It is not a bond and does not behave like one. It’s equivalent to cash with a high interest rate.