Ishares TIP div yield is 7%??

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Neus
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Ishares TIP div yield is 7%??

Post by Neus »

So i heard about this ishares inflation protected bond, and IBKR stat says the div yield is 7%

This is ridiculously high

Can anyone confirm or deny this?

If it’s true, is there accumulating version for NON Us investor?
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oldcomputerguy
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Re: Ishares TIP div yield is 7%??

Post by oldcomputerguy »

Can you provide the ticker for the fund in question?
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dcabler
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Re: Ishares TIP div yield is 7%??

Post by dcabler »

oldcomputerguy wrote: Tue Jul 27, 2021 4:52 am Can you provide the ticker for the fund in question?
It's in the thread title: TIP

Yes, all of the TIPs funds are showing a high SEC yield right now (usually shown as a nominal, not real yield). Will it stay up like that? Who knows, but somehow I doubt it.
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Re: Ishares TIP div yield is 7%??

Post by khunron »

oldcomputerguy wrote: Tue Jul 27, 2021 4:52 am Can you provide the ticker for the fund in question?
The ticker is TIP and Forbes says the yield is: Dividend Yield 0.96%; Ex-Dividend Date Jul 01, 2021

OP, care to provide a link showing otherwise.
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Re: Ishares TIP div yield is 7%??

Post by oldcomputerguy »

Thanks, guys, I missed that. I read "TIP" as "TIPS". Guess I need a bit more morning coffee. :D
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Re: Ishares TIP div yield is 7%??

Post by dcabler »

oldcomputerguy wrote: Tue Jul 27, 2021 5:28 am Thanks, guys, I missed that. I read "TIP" as "TIPS". Guess I need a bit more morning coffee. :D
Haha! I'm on my 3rd cup and starting to feel the buzz myself. :D
TIP is one of the many tickers out there that are annoying, especially when you try to google it...
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Re: Ishares TIP div yield is 7%??

Post by dcabler »

khunron wrote: Tue Jul 27, 2021 5:26 am
oldcomputerguy wrote: Tue Jul 27, 2021 4:52 am Can you provide the ticker for the fund in question?
The ticker is TIP and Forbes says the yield is: Dividend Yield 0.96%; Ex-Dividend Date Jul 01, 2021

OP, care to provide a link showing otherwise.
From today on ishares website: https://www.ishares.com/us/products/239 ... lsrc=aw.ds

SEC yield: 8.14% (yep, SEC yield - one of many ways funds report yield)

Cheers.
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Re: Ishares TIP div yield is 7%??

Post by Neus »

khunron wrote: Tue Jul 27, 2021 5:26 am
oldcomputerguy wrote: Tue Jul 27, 2021 4:52 am Can you provide the ticker for the fund in question?
The ticker is TIP and Forbes says the yield is: Dividend Yield 0.96%; Ex-Dividend Date Jul 01, 2021

OP, care to provide a link showing otherwise.
Here's screenshot from my ibkr

Image
outsystems file upload example
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Neus
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Re: Ishares TIP div yield is 7%??

Post by Neus »

dcabler wrote: Tue Jul 27, 2021 5:34 am
khunron wrote: Tue Jul 27, 2021 5:26 am
oldcomputerguy wrote: Tue Jul 27, 2021 4:52 am Can you provide the ticker for the fund in question?
The ticker is TIP and Forbes says the yield is: Dividend Yield 0.96%; Ex-Dividend Date Jul 01, 2021

OP, care to provide a link showing otherwise.
From today on ishares website: https://www.ishares.com/us/products/239 ... lsrc=aw.ds

SEC yield: 8.14% (yep, SEC yield - one of many ways funds report yield)

Cheers.
Jesus..

So it's true

Any Ireland domiciled version of this ETF?

Does this one same with TIP? https://markets.ft.com/data/etfs/tearsh ... TP:LSE:USD
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Re: Ishares TIP div yield is 7%??

Post by oldcomputerguy »

That's an annualized figure based on the most recent dividend distribution (July 1). In other words, it's the figure showing what the year's return would have been if every month's dividend had been this amount. Due to the recent spike in inflation the most recent dividends have been higher than in recent past. For comparison, the dividend distribution in June was an annualized 6.4%, in May it was 4.8%, and in April it was 2.8%.
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Re: Ishares TIP div yield is 7%??

Post by dcabler »

Neus wrote: Tue Jul 27, 2021 5:39 am
dcabler wrote: Tue Jul 27, 2021 5:34 am
khunron wrote: Tue Jul 27, 2021 5:26 am
oldcomputerguy wrote: Tue Jul 27, 2021 4:52 am Can you provide the ticker for the fund in question?
The ticker is TIP and Forbes says the yield is: Dividend Yield 0.96%; Ex-Dividend Date Jul 01, 2021

OP, care to provide a link showing otherwise.
From today on ishares website: https://www.ishares.com/us/products/239 ... lsrc=aw.ds

SEC yield: 8.14% (yep, SEC yield - one of many ways funds report yield)

Cheers.
Jesus..

So it's true

Any Ireland domiciled version of this ETF?

Does this one same with TIP? https://markets.ft.com/data/etfs/tearsh ... TP:LSE:USD
No idea, but I would caution you about getting too excited by this. This could easily be a short term blip in yield given the way TIPs bonds actually work...
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Re: Ishares TIP div yield is 7%??

Post by seajay »

Careful !

TIPS priced to inflation + around 1% when headline inflation is running at near 6% is the sort of reported marked to market "yield" you are seeing. A factor is if inflation stays that high then the bond prices will tend to decline, potentially a lot, and endure capital value losses that eat away those "rewards". Even if inflation reverts to around 2% target levels then bonds priced to 1% will tend to see the yield rise/prices fall and still see quite a large capital/price drop. That yield is not what you might expect as the reward when held longer term.
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Re: Ishares TIP div yield is 7%??

Post by Neus »

dcabler wrote: Tue Jul 27, 2021 5:53 am
Neus wrote: Tue Jul 27, 2021 5:39 am
dcabler wrote: Tue Jul 27, 2021 5:34 am
khunron wrote: Tue Jul 27, 2021 5:26 am
oldcomputerguy wrote: Tue Jul 27, 2021 4:52 am Can you provide the ticker for the fund in question?
The ticker is TIP and Forbes says the yield is: Dividend Yield 0.96%; Ex-Dividend Date Jul 01, 2021

OP, care to provide a link showing otherwise.
From today on ishares website: https://www.ishares.com/us/products/239 ... lsrc=aw.ds

SEC yield: 8.14% (yep, SEC yield - one of many ways funds report yield)

Cheers.
Jesus..

So it's true

Any Ireland domiciled version of this ETF?

Does this one same with TIP? https://markets.ft.com/data/etfs/tearsh ... TP:LSE:USD
No idea, but I would caution you about getting too excited by this. This could easily be a short term blip in yield given the way TIPs bonds actually work...
Ah i see, thanks for the warning
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Neus
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Re: Ishares TIP div yield is 7%??

Post by Neus »

seajay wrote: Tue Jul 27, 2021 5:58 am Careful !

TIPS priced to inflation + around 1% when headline inflation is running at near 6% is the sort of reported marked to market "yield" you are seeing. A factor is if inflation stays that high then the bond prices will tend to decline, potentially a lot, and endure capital value losses that eat away those "rewards". Even if inflation reverts to around 2% target levels then bonds priced to 1% will tend to see the yield rise/prices fall and still see quite a large capital/price drop. That yield is not what you might expect as the reward when held longer term.
Ah i see, thanks for the warning
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Re: Ishares TIP div yield is 7%??

Post by Neus »

oldcomputerguy wrote: Tue Jul 27, 2021 5:52 am That's an annualized figure based on the most recent dividend distribution (July 1). In other words, it's the figure showing what the year's return would have been if every month's dividend had been this amount. Due to the recent spike in inflation the most recent dividends have been higher than in recent past. For comparison, the dividend distribution in June was an annualized 6.4%, in May it was 4.8%, and in April it was 2.8%.
Ah i see.. So it's annualized..

Damn these data can be tricky tricky
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Re: Ishares TIP div yield is 7%??

Post by SimpleGift »

Neus wrote: Tue Jul 27, 2021 6:05 am Damn these data can be tricky tricky.
Yes, the SEC 30-day yield published for most TIPS funds is almost always a bogus number, as pointed out above, since it annualizes the monthly inflation adjustment for the previous month.

Compare for yourself the differing methodologies for reporting the yield by iShares vs. Vanguard for their TIPS offerings:

iShares TIPS Bond ETF (TIP)
iShares wrote:This yield reflects the interest earned after deducting the fund's expenses during the most recent 30-day period by the average investor in the fund. Negative 30-Day SEC Yield results when accrued expenses of the past 30 days exceed the income collected during the past 30 days. The 30-Day SEC Yield is adjusted daily based on changes in the rate of inflation, as provided by the US Treasury schedule that reflects how the monthly Consumer Price Index (CPI) is accrued daily. An exceptionally high 30-Day SEC yield may be attributable to a rise in the inflation rate, which might not be repeated.
Vanguard Inflation-Protected Securities Fund Investor Shares (VIPSX)
Vanguard wrote:The yield quoted is the real yield, or the yield before adjusting for inflation. The actual yield of Vanguard Inflation-Protected Securities Fund will be a combination of the real yield and an inflation adjustment. A complete estimate of the fund's yield requires that an estimate of future inflation be added to the real yield. Because inflation fluctuates, it cannot be projected into the future precisely enough to be included in the yield quote.
Vanguard bypasses the bogus SEC 30-day methodology, and simply reports the real yield for their TIPS funds and ETFs. To this real yield, one can add their own estimate of the future annual inflation rate to get a rough estimate of the fund's prospective annual yield.
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Re: Ishares TIP div yield is 7%??

Post by Robot Monster »

There was a Wall Street Journal article written by Jason Zweig published this month, "Don’t Believe the Inflated Yields on Inflation-Protected Bond Funds...An 8% return on government bonds? Only a nutty calculation can make it so." link
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Re: Ishares TIP div yield is 7%??

Post by Neus »

Robot Monster wrote: Tue Jul 27, 2021 9:46 am There was a Wall Street Journal article written by Jason Zweig published this month, "Don’t Believe the Inflated Yields on Inflation-Protected Bond Funds...An 8% return on government bonds? Only a nutty calculation can make it so." link
Ah i see,
thanks for the info

Unfortunately i’m not wsj subscriber
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Re: Ishares TIP div yield is 7%??

Post by Neus »

SimpleGift wrote: Tue Jul 27, 2021 8:57 am
Neus wrote: Tue Jul 27, 2021 6:05 am Damn these data can be tricky tricky.
Yes, the SEC 30-day yield published for most TIPS funds is almost always a bogus number, as pointed out above, since it annualizes the monthly inflation adjustment for the previous month.

Compare for yourself the differing methodologies for reporting the yield by iShares vs. Vanguard for their TIPS offerings:

iShares TIPS Bond ETF (TIP)
iShares wrote:This yield reflects the interest earned after deducting the fund's expenses during the most recent 30-day period by the average investor in the fund. Negative 30-Day SEC Yield results when accrued expenses of the past 30 days exceed the income collected during the past 30 days. The 30-Day SEC Yield is adjusted daily based on changes in the rate of inflation, as provided by the US Treasury schedule that reflects how the monthly Consumer Price Index (CPI) is accrued daily. An exceptionally high 30-Day SEC yield may be attributable to a rise in the inflation rate, which might not be repeated.
Vanguard Inflation-Protected Securities Fund Investor Shares (VIPSX)
Vanguard wrote:The yield quoted is the real yield, or the yield before adjusting for inflation. The actual yield of Vanguard Inflation-Protected Securities Fund will be a combination of the real yield and an inflation adjustment. A complete estimate of the fund's yield requires that an estimate of future inflation be added to the real yield. Because inflation fluctuates, it cannot be projected into the future precisely enough to be included in the yield quote.
Vanguard bypasses the bogus SEC 30-day methodology, and simply reports the real yield for their TIPS funds and ETFs. To this real yield, one can add their own estimate of the future annual inflation rate to get a rough estimate of the fund's prospective annual yield.
I see, thanks for the explanation
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Re: Ishares TIP div yield is 7%??

Post by #Cruncher »

Neus wrote: Tue Jul 27, 2021 5:39 amAny Ireland domiciled version of this ETF?
The TIP ETF isn't special in this regard. All TIPS funds subject to US tax law will be paying out the CPI based principal increase.
dcabler wrote: Tue Jul 27, 2021 5:53 amThis could easily be a short term blip in yield given the way TIPs bonds actually work...
I would expect the large dividends [by TIPS funds that pay dividends monthly] to continue for at least two more months. Because of the lag in CPI values used to index TIPS principal, the July 1st dividend last paid by the TIP ETF (see TIP Dividend History), reflected the CPI through April 2021 (see monthly CPI-U and daily Ref CPI). The CPI had further large monthly increases in May and June. So even if the CPI remains the same after that, there will still likely be large dividends August 1st and September 1st. Here are the CPI values and increases since last October:

Code: Select all

---------- CPI-U ----------   ---- Pct Increase ---
  Month    Applied   Value     1 Mo    X 12   Cumul
--------  --------  -------   -----    ----   -----
Oct 2020  1/1/2021  260.388
Nov 2020  2/1/2021  260.229  (0.06%)  (0.7%)  (0.1%)
Dec 2020  3/1/2021  260.474   0.09%    1.1%    0.0% 
Jan 2021  4/1/2021  261.582   0.43%    5.1%    0.5% 
Feb 2021  5/1/2021  263.014   0.55%    6.6%    1.0% 
Mar 2021  6/1/2021  264.877   0.71%    8.5%    1.7% 
Apr 2021  7/1/2021  267.054   0.82%    9.9%    2.6%
May 2021  8/1/2021  269.195   0.80%    9.6%    3.4% 
Jun 2021  9/1/2021  271.696   0.93%   11.1%    4.3%
If the October 2021 CPI-U were to equal June's, the principal values of all TIPS held during 2021 would increase 4.3%. TIPS funds are required to pay this out in dividends sometime during the year -- reduced by the negative interest income TIPS currently have [*] and by each fund's expenses.

* All TIPS currently have negative yields-to-maturity. For funds like the TIP ETF that follow the index of all TIPS maturing in more than one year ("1+" index), these average about -1.6% as shown in the latest update to my TIPS Consistent Yield thread.
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Re: Ishares TIP div yield is 7%??

Post by Northern Flicker »

Published projected yields of TIPS funds are wildly all over the map. All you should care about is the real yield, which as of July 26 is -1.47% per the iShares web site. Inflation would have to be about 8.47% over the next year to get a noninal yield of 7% over the period.
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Re: Ishares TIP div yield is 7%??

Post by Neus »

#Cruncher wrote: Tue Jul 27, 2021 11:47 am
Neus wrote: Tue Jul 27, 2021 5:39 amAny Ireland domiciled version of this ETF?
The TIP ETF isn't special in this regard. All TIPS funds subject to US tax law will be paying out the CPI based principal increase.
dcabler wrote: Tue Jul 27, 2021 5:53 amThis could easily be a short term blip in yield given the way TIPs bonds actually work...
I would expect the large dividends [by TIPS funds that pay dividends monthly] to continue for at least two more months. Because of the lag in CPI values used to index TIPS principal, the July 1st dividend last paid by the TIP ETF (see TIP Dividend History), reflected the CPI through April 2021 (see monthly CPI-U and daily Ref CPI). The CPI had further large monthly increases in May and June. So even if the CPI remains the same after that, there will still likely be large dividends August 1st and September 1st. Here are the CPI values and increases since last October:

Code: Select all

---------- CPI-U ----------   ---- Pct Increase ---
  Month    Applied   Value     1 Mo    X 12   Cumul
--------  --------  -------   -----    ----   -----
Oct 2020  1/1/2021  260.388
Nov 2020  2/1/2021  260.229  (0.06%)  (0.7%)  (0.1%)
Dec 2020  3/1/2021  260.474   0.09%    1.1%    0.0% 
Jan 2021  4/1/2021  261.582   0.43%    5.1%    0.5% 
Feb 2021  5/1/2021  263.014   0.55%    6.6%    1.0% 
Mar 2021  6/1/2021  264.877   0.71%    8.5%    1.7% 
Apr 2021  7/1/2021  267.054   0.82%    9.9%    2.6%
May 2021  8/1/2021  269.195   0.80%    9.6%    3.4% 
Jun 2021  9/1/2021  271.696   0.93%   11.1%    4.3%
If the October 2021 CPI-U were to equal June's, the principal values of all TIPS held during 2021 would increase 4.3%. TIPS funds are required to pay this out in dividends sometime during the year -- reduced by the negative interest income TIPS currently have [*] and by each fund's expenses.

* All TIPS currently have negative yields-to-maturity. For funds like the TIP ETF that follow the index of all TIPS maturing in more than one year ("1+" index), these average about -1.6% as shown in the latest update to my TIPS Consistent Yield thread.
Wow.. it’s yield actually negative..?

Mindblown
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Re: Ishares TIP div yield is 7%??

Post by Northern Flicker »

Its real yield is negative. Its nominal yield is real yield + inflation rate.

Here is a source of real yields:

https://www.treasury.gov/resource-cente ... =realyield
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