TIPs: The final year in the life of a 5 year TIP

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grok87
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TIPs: The final year in the life of a 5 year TIP

Post by grok87 »

I own a TIPs bond that will mature 1 year from today- i.e. 4/15/2023. In this thread i plan to track what happens over the next year.

Here is my motivation- i.e. actionability:
I've always been curious about what happens to TIPs during their last year of life.My understanding is that the real yields become very erratic during the last year of life since the CPI they adjust off of is not seasonally adjusted. Perhaps for this reason the PIMCO short term tips excludes them STPZ
https://www.pimco.com/en-us/investments ... aded-fund/
as does the schwab etf SCHP fund which tracks this index
https://data.bloomberglp.com/profession ... ries-L.pdf
as does the regular vanguard fund VIPSX (or at least the index it is benchmarked against)

whereas the Vanguard fund VTAPX and the Ishares fund STIP include them. So are they are worthwhile investment or not? Should i be selling like VIPSX and SCHP are? or holding like VTAPX and STIP do?

Here is the data as of yesterday 4/14/2022:
Coupon: 0.625%
Price: 103.829
Real yield to maturity: -3.26%
Spread to treasuries = -5.05% (i.e. breakeven inflation is 5.05%)
reference nominal treasury =coupon 0.25% due 4/15/2023- (this must have been auctioned on 4/15/2021)
reference treasury yield 1.79% (=-3.26% - -5.05%) (note 1 year tbill is at 1.70%)
index factor 1.13773
Price including index factor: 118.265895

I think that's it. Will try to update at least weekly.

cheers,
grok
RIP Mr. Bogle.
jebmke
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Re: TIPs: The final year in the life of a 5 year TIP

Post by jebmke »

Thanks; I have a big slug of Jan 2025s that I bought in the fall of 2008 that will be going through the same process. 2.375% coupon.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
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Re: TIPs: The final year in the life of a 5 year TIP

Post by #Cruncher »

grok87 wrote: Fri Apr 15, 2022 8:45 amMy understanding is that the real yields become very erratic during the last year of life since the CPI they adjust off of is not seasonally adjusted.
Not really. The market knows how TIPS are indexed and takes the use of non-seasonally adjusted CPI into account. (See TIPS yield curve and seasonal adjustment update by Kevin M.) I believe the main reason for the erratic movement of yields for near-to-maturity TIPS is simply the mathematics of yield calculation. For example, here is the effect on yields of a change in price from 100 to 99.5 for bonds maturing in three months, one year, and five years (calculated with the Excel RATE function):

Code: Select all

Row              Col A    Col B    Col C    Col D   Formula in col B copied to col D
 27             Coupon    1.00%
 28          Old Price   100.00
 29          New Price    99.50
 30  Years to maturity     0.25     1.00     5.00
 31          Old yield    1.00%    1.00%    1.00%  =RATE(B$30,100*$B$27,-$B28,100,0)
 32          New Yield    3.04%    1.51%    1.10%  =RATE(B$30,100*$B$27,-$B29,100,0)
 33         Difference    2.04%    0.51%    0.10%  =B32-B31
grok87, in same post, wrote:So are they are worthwhile investment or not? Should i be selling like VIPSX and SCHP are? or holding like VTAPX and STIP do?
I see no reason not to hold TIPS until final maturity. During their last year they can have a distorting effect on the average yields of funds that include them. But this a reporting problem, not an investing problem. (For example, see footnote 2 at the bottom of my latest update of the "Consistent Yield & Duration to Help Choose TIPS Fund" thread.)
grok87, in same post, wrote:Here is the data as of yesterday 4/14/2022:
Coupon: 0.625%
Price: 103.829
Real yield to maturity: -3.26% <===
Spread to treasuries = -5.05% (i.e. breakeven inflation is 5.05%) <===
reference nominal treasury =coupon 0.25% due 4/15/2023- (this must have been auctioned on 4/15/2021)
reference treasury yield 1.79% (=-3.26% - -5.05%) (note 1 year tbill is at 1.70%)
index factor 1.13773
Price including index factor: 118.265895 <===
I get a slightly higher yield of -3.145% calculated both with the YIELD and XIRR Excel functions (in cells B6 and B19 below). Also the correct adjusted price is 118.129 (103.829 X 1.13773), not 118.266. And if measuring from 6/1/2022 (the date of the last known Reference CPI used to index TIPS) instead of from the 4/18/2022 settlement date, I back into a breakeven inflation rate of 3.73% rather than 5.05%.

Here is a table similar to one I prepared in this post of Kevin M's thread, Bought 2y Treasury and 2y TIPS:

Code: Select all

Row              Col A       Col B      Col C       Col D    Formulas in column B
  1         Settlement   4/18/2022
  2           Maturity   4/15/2023
  3             Coupon      0.625%
  4         Face value      10,000
  5              Price     103.829
  6              Yield     -3.145%                          =YIELD(B1,B2,B3,B5,100,2,1)
  7     Days to settle           3                          =COUPDAYBS(B1,B2,2,1)
  8     Days in period         183                          =COUPDAYS(B1,B2,2,1)
  9   Accrued interest        0.51                          =B4*(B3/2)*(B7/B8)
 10  Last date Ref CPI               6/1/2022
 11   Last index ratio                1.15746
 12   Annual inflation                 3.730% <===

Code: Select all

 13                         Real       Index      Nominal
 14                      Cash Flow     Ratios   Cash Flow
                         ---------    -------   ---------
 15          4/18/2022  (10,383.41)   1.13773  (11,813.52)  =-B4*(B5/100)-B9
 16         10/15/2022       31.25    1.17336       36.67   =B$4*(B$3/2)+IF($A16=B$2,B$4,0)
 17          4/15/2023   10,031.25    1.19498   11,987.19    v  v  v
 18      Profit/(Loss)     (320.91)                210.34   =SUM(B15:B17)
 19               XIRR     -3.145%                +1.790%   =2*((1+XIRR(B15:B17,$A15:$A17))^0.5-1)
Notes:
  • Column B is the TIPS denominated in constant (i.e., 4/15/2018) dollars.
  • Column C contains actual and estimated index ratios for the TIPS. April 18 and June 1 are from this web page. Ones for 10/15/2022 and 4/15/2023 are calculated based on the assumed subsequent inflation in cell C12. E.g.,
    1.17336 = 1.15746 * 1.0373 ^ ((DATE(2022, 10, 15) - DATE(2022, 6, 1)) / 365)
  • Column D is the TIPS constant dollar amounts multiplied by the index ratios to produce the assumed nominal cash flows.
  • Row 19 shows the returns based on the cash flows in rows 15 through 17. The 3.73% assumed inflation in cell C12 was arrived at by trial and error to make the 1.79% nominal TIPS return equal the 1.79% yield of the nominal Treasury maturing on the same date.
  • Table uses the Excel YIELD, COUPDAYBS, COUPDAYS, and XIRR Excel functions.
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grok87
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Re: TIPs: The final year in the life of a 5 year TIP

Post by grok87 »

#Cruncher wrote: Fri Apr 15, 2022 4:20 pm
grok87, in same post, wrote:Here is the data as of yesterday 4/14/2022:
Coupon: 0.625%
Price: 103.829
Real yield to maturity: -3.26% <===
Spread to treasuries = -5.05% (i.e. breakeven inflation is 5.05%) <===
reference nominal treasury =coupon 0.25% due 4/15/2023- (this must have been auctioned on 4/15/2021)
reference treasury yield 1.79% (=-3.26% - -5.05%) (note 1 year tbill is at 1.70%)
index factor 1.13773
Price including index factor: 118.265895 <===
I get a slightly higher yield of -3.145% calculated both with the YIELD and XIRR Excel functions (in cells B6 and B19 below). Also the correct adjusted price is 118.129 (103.829 X 1.13773), not 118.266. And if measuring from 6/1/2022 (the date of the last known Reference CPI used to index TIPS) instead of from the 4/18/2022 settlement date, I back into a breakeven inflation rate of 3.73% rather than 5.05%.
THanks #Cruncher. the 3.73% figure makes me feel better about holding to maturity.
cheers,
grok
RIP Mr. Bogle.
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grok87
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Re: TIPs: The final year in the life of a 5 year TIP

Post by grok87 »

here's the update. not much has happened despite the selloff in the bond market

Date Price (Ask) Real yield Spread to treasuries Index factor Price inc. index factor
4/14/2022 103.829 -3.26% -5.05% 1.13773 118.12936817
4/19/2022 103.835 -3.172% -5.086% 1.13842 118.207840
RIP Mr. Bogle.
HootingSloth
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Re: TIPs: The final year in the life of a 5 year TIP

Post by HootingSloth »

Thanks for doing this.
Global Market Portfolio + modest tilt towards volatility (80/20->60/40 as approach FI) + modest tilt away from exchange rate risk (80% global+20% U.S. stocks; currency-hedge bonds) + tax optimization
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grok87
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Re: TIPs: The final year in the life of a 5 year TIP

Post by grok87 »

update for May 5th
Date Price (Ask) Real yield Spread to treasuries Index factor Price inc. index factor
4/14/2022 103.829 -3.26% -5.05% 1.13773 118.12936817
4/19/2022 103.835 -3.172% -5.086% 1.13842 118.207840
5/5/2022 103.203 -2.735% -4.81% 1.14615 118.286118

so far very uneventful. Price is moving to 100 where it will end up at maturity. Real yield is increasing and at maturity would be the 0.625% coupon i guess. Spread to treasuries, breakeven, is dropping which is interesting, not sure what to make of that...
cheers,
grok
RIP Mr. Bogle.
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Re: TIPs: The final year in the life of a 5 year TIP

Post by Parkinglotracer »

I have an mba and think I am educated on how bonds and financial markets work. TIPs just seem like “magic and mirrors”. Can someone explain this in a basic and simple manner?
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Re: TIPs: The final year in the life of a 5 year TIP

Post by gmaynardkrebs »

Parkinglotracer wrote: Fri May 06, 2022 8:01 am I have an mba and think I am educated on how bonds and financial markets work. TIPs just seem like “magic and mirrors”. Can someone explain this in a basic and simple manner?
https://www.bogleheads.org/wiki/Treasur ... d_Security
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Re: TIPs: The final year in the life of a 5 year TIP

Post by billyt »

TIPS have a fixed nominal yield. The principal is adjusted for inflation according to the CPI. That's where the inflation protection comes from, principal plus inflation returned to you at maturity. Of course if the principal goes up, the absolute value of the interest payments goes up too. Like other Treasuries, they can be issued at a discount or premium. Premium can give you a negative real yield, which could be positive nominal yield.
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Re: TIPs: The final year in the life of a 5 year TIP

Post by Parkinglotracer »

gmaynardkrebs wrote: Fri May 06, 2022 8:55 am
Parkinglotracer wrote: Fri May 06, 2022 8:01 am I have an mba and think I am educated on how bonds and financial markets work. TIPs just seem like “magic and mirrors”. Can someone explain this in a basic and simple manner?
https://www.bogleheads.org/wiki/Treasur ... d_Security
Great place to start thanks.
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Re: TIPs: The final year in the life of a 5 year TIP

Post by hudson »

grok87 wrote: Fri Apr 15, 2022 8:45 am I own a TIPs bond that will mature 1 year from today- i.e. 4/15/2023. In this thread i plan to track what happens over the next year.

Here is my motivation- i.e. actionability:
I've always been curious about what happens to TIPs during their last year of life.My understanding is that the real yields become very erratic during the last year of life since the CPI they adjust off of is not seasonally adjusted. Perhaps for this reason the PIMCO short term tips excludes them STPZ
https://www.pimco.com/en-us/investments ... aded-fund/
as does the schwab etf SCHP fund which tracks this index
https://data.bloomberglp.com/profession ... ries-L.pdf
as does the regular vanguard fund VIPSX (or at least the index it is benchmarked against)

whereas the Vanguard fund VTAPX and the Ishares fund STIP include them. So are they are worthwhile investment or not? Should i be selling like VIPSX and SCHP are? or holding like VTAPX and STIP do?

Here is the data as of yesterday 4/14/2022:
Coupon: 0.625%
Price: 103.829
Real yield to maturity: -3.26%
Spread to treasuries = -5.05% (i.e. breakeven inflation is 5.05%)
reference nominal treasury =coupon 0.25% due 4/15/2023- (this must have been auctioned on 4/15/2021)
reference treasury yield 1.79% (=-3.26% - -5.05%) (note 1 year tbill is at 1.70%)
index factor 1.13773
Price including index factor: 118.265895

I think that's it. Will try to update at least weekly.

cheers,
grok
Thanks for posting!
What if?
Price was $103.829.
You bought $103,829 worth four years ago.
About how much could you sell it for today?
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grok87
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Re: TIPs: The final year in the life of a 5 year TIP

Post by grok87 »

I think the bonds were issued at close to par. I’ll Assume 100 but probably someone will correct me. Today you can sell for 118.29.
So 18.3% gain pretax
RIP Mr. Bogle.
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Re: TIPs: The final year in the life of a 5 year TIP

Post by gmaynardkrebs »

grok87 wrote: Sat May 07, 2022 5:28 pm I think the bonds were issued at close to par. I’ll Assume 100 but probably someone will correct me. Today you can sell for 118.29.
So 18.3% gain pretax
Although, I think you've already paid the tax on the inflation adj as OID, unless in an IRA.
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Kevin M
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Re: TIPs: The final year in the life of a 5 year TIP

Post by Kevin M »

From Fidelity quotes downloaded shortly before close on Friday, for the 4/15/2023 I get this:

Ask yield: -2.83%
Ask yield, seasonally adjusted: -2.88%
BEI (Nominal - real): 4.91%
BEI using a #Cruncher calculation (not the XIRR one): 4.24%
BEI (nominal - real), seasonally adjusted: 4.96%
BEI using a #Cruncher calculation (not the XIRR one), seasonally adjusted: 4.38%

For the shortest-term TIPS, maturing 7/15/2022:

Ask yield: -9.12%
Ask yield, seasonally adjusted: -7.56%
BEI (Nominal - real): 9.75%
BEI using a #Cruncher calculation (not the XIRR one): 7.64%
BEI (nominal - real), seasonally adjusted: 8.18%
BEI using a #Cruncher calculation (not the XIRR one), seasonally adjusted: 5.49%

I pay attention to seasonally adjusted yields when buying TIPS.

Kevin
If I make a calculation error, #Cruncher probably will let me know.
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Re: TIPs: The final year in the life of a 5 year TIP

Post by Hebell »

I buy and hold individual TIPS, bought at auction. This thread reminded me why I avoid the secondary market.
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Re: TIPs: The final year in the life of a 5 year TIP

Post by hudson »

grok87 wrote: Sat May 07, 2022 5:28 pm I think the bonds were issued at close to par. I’ll Assume 100 but probably someone will correct me. Today you can sell for 118.29.
So 18.3% gain pretax
Thanks Grok!
How much payout over 4 years?
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grok87
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Re: TIPs: The final year in the life of a 5 year TIP

Post by grok87 »

hudson wrote: Sun May 08, 2022 4:58 am
grok87 wrote: Sat May 07, 2022 5:28 pm I think the bonds were issued at close to par. I’ll Assume 100 but probably someone will correct me. Today you can sell for 118.29.
So 18.3% gain pretax
Thanks Grok!
How much payout over 4 years?
well that's a tricky question to answer. perhaps someone else will dive into the details. the answer below will be somewhat wrong. but here is a rough way to think about it:

buy at par = 100
inflation adjusted principal today (at year 4) = 114.615
average adjusted principal for coupons paid over those for years = 108.22
number of coupon payments 8
estimated coupon payments = 8*108.22*0.625%/2 = $2.706
cheers,
grok
RIP Mr. Bogle.
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grok87
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Re: TIPs: The final year in the life of a 5 year TIP

Post by grok87 »

gmaynardkrebs wrote: Sat May 07, 2022 9:08 pm
grok87 wrote: Sat May 07, 2022 5:28 pm I think the bonds were issued at close to par. I’ll Assume 100 but probably someone will correct me. Today you can sell for 118.29.
So 18.3% gain pretax
Although, I think you've already paid the tax on the inflation adj as OID, unless in an IRA.
agreed
RIP Mr. Bogle.
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grok87
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Re: TIPs: The final year in the life of a 5 year TIP

Post by grok87 »

Kevin M wrote: Sat May 07, 2022 9:33 pm From Fidelity quotes downloaded shortly before close on Friday, for the 4/15/2023 I get this:

Ask yield: -2.83%
Ask yield, seasonally adjusted: -2.88%
BEI (Nominal - real): 4.91%
BEI using a #Cruncher calculation (not the XIRR one): 4.24%
BEI (nominal - real), seasonally adjusted: 4.96%
BEI using a #Cruncher calculation (not the XIRR one), seasonally adjusted: 4.38%

For the shortest-term TIPS, maturing 7/15/2022:

Ask yield: -9.12%
Ask yield, seasonally adjusted: -7.56%
BEI (Nominal - real): 9.75%
BEI using a #Cruncher calculation (not the XIRR one): 7.64%
BEI (nominal - real), seasonally adjusted: 8.18%
BEI using a #Cruncher calculation (not the XIRR one), seasonally adjusted: 5.49%

I pay attention to seasonally adjusted yields when buying TIPS.

Kevin
thanks. i didn't realize the fidelity quotes gave you seasonally adjusted real yields.
RIP Mr. Bogle.
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Kevin M
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Re: TIPs: The final year in the life of a 5 year TIP

Post by Kevin M »

grok87 wrote: Sun May 08, 2022 8:14 am thanks. i didn't realize the fidelity quotes gave you seasonally adjusted real yields.
They don't. I download the quotes into a spreadsheet, and calculate the seasonal adjustment using a method published by Paul Canty. Previously I used a method shared by #Cruncher, but the Canty approach is much simpler, and results agree with the #Cruncher method.

Relevant posts:

TIPS yield curve and seasonal adjustment update

Re: TIPs ladder mavens: help me understand some yield anomalies

The Canty paper:

Seasonally adjusted pricesfor inflation-linked bonds

Kevin
If I make a calculation error, #Cruncher probably will let me know.
FactualFran
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Re: TIPs: The final year in the life of a 5 year TIP

Post by FactualFran »

grok87 wrote: Sun May 08, 2022 8:10 am well that's a tricky question to answer. perhaps someone else will dive into the details. the answer below will be somewhat wrong. but here is a rough way to think about it:

buy at par = 100
inflation adjusted principal today (at year 4) = 114.615
average adjusted principal for coupons paid over those for years = 108.22
number of coupon payments 8
estimated coupon payments = 8*108.22*0.625%/2 = $2.706
Some details: the adjusted auction price was 100.196611 and the sum of the 8 coupon payments was $2.637 per $100 par.
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grok87
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Re: TIPs: The final year in the life of a 5 year TIP

Post by grok87 »

FactualFran wrote: Sun May 08, 2022 11:44 am
grok87 wrote: Sun May 08, 2022 8:10 am well that's a tricky question to answer. perhaps someone else will dive into the details. the answer below will be somewhat wrong. but here is a rough way to think about it:

buy at par = 100
inflation adjusted principal today (at year 4) = 114.615
average adjusted principal for coupons paid over those for years = 108.22
number of coupon payments 8
estimated coupon payments = 8*108.22*0.625%/2 = $2.706
Some details: the adjusted auction price was 100.196611 and the sum of the 8 coupon payments was $2.637 per $100 par.
thank you!
cheers,
grok
RIP Mr. Bogle.
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grok87
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Re: TIPs: The final year in the life of a 5 year TIP

Post by grok87 »

Kevin M wrote: Sun May 08, 2022 11:35 am
grok87 wrote: Sun May 08, 2022 8:14 am thanks. i didn't realize the fidelity quotes gave you seasonally adjusted real yields.
They don't. I download the quotes into a spreadsheet, and calculate the seasonal adjustment using a method published by Paul Canty. Previously I used a method shared by #Cruncher, but the Canty approach is much simpler, and results agree with the #Cruncher method.

Relevant posts:

TIPS yield curve and seasonal adjustment update

Re: TIPs ladder mavens: help me understand some yield anomalies

The Canty paper:

Seasonally adjusted pricesfor inflation-linked bonds

Kevin
thanks
RIP Mr. Bogle.
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Re: TIPs: The final year in the life of a 5 year TIP

Post by #Cruncher »

grok87 wrote: Sun May 08, 2022 8:10 am
hudson wrote: Sun May 08, 2022 4:58 amHow much payout over 4 years?
well that's a tricky question to answer. perhaps someone else will dive into the details. ...
We can calculate the real and nominal return for a TIPS bought at the original auction in April 2018 and sold at Friday's price. Using Excel's XIRR function I get a 1.42% real return and a 4.84% nominal return shown at the bottom of this table:

Code: Select all

Face value      10,000
   Matures   4/15/2023
    Coupon      0.625%
      Date      Real $  Idx Ratio   Nominal $

Code: Select all

 4/30/2018   (9,997.07)   1.00226  (10,019.66) <-- purchase
 4/30/2018       (2.56)   1.00226       (2.57) <-- accrued interest
10/15/2018       31.25    1.01481       31.71  <-- interest payment
 4/15/2019       31.25    1.01537       31.73  v v v
10/15/2019       31.25    1.03291       32.28 
 4/15/2020       31.25    1.03989       32.50 
10/15/2020       31.25    1.04460       32.64 
 4/15/2021       31.25    1.05579       32.99 
10/15/2021       31.25    1.10011       34.38 
 4/15/2022       31.25    1.13670       35.52 
 5/09/2022        4.10    1.14615        4.70  <-- accrued interest
 5/09/2022   10,321.88    1.14615   11,830.42  <-- sale
       Sum      576.34               2,076.64 
      XIRR       1.42%                  4.84%
Sources
Last edited by #Cruncher on Sat May 14, 2022 6:46 pm, edited 1 time in total.
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grok87
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Re: TIPs: The final year in the life of a 5 year TIP

Post by grok87 »

#Cruncher wrote: Sun May 08, 2022 1:08 pm
grok87 wrote: Sun May 08, 2022 8:10 am
hudson wrote: Sun May 08, 2022 4:58 amHow much payout over 4 years?
well that's a tricky question to answer. perhaps someone else will dive into the details. ...
We can calculate the real and nominal return for a TIPS bought at the original auction in April 2018 and sold at Friday's price. Using Excel's XIRR function I get a 1.42% real return and a 4.84% nominal return shown at the bottom of this table:
thanks
RIP Mr. Bogle.
hudson
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Re: TIPs: The final year in the life of a 5 year TIP

Post by hudson »

Thanks Grok and #Cruncher!
Most useful!
I followed #Cruncher's links. I have lots to learn.
As usual, I never fully learn something until I own it.
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Re: TIPs: The final year in the life of a 5 year TIP

Post by grabiner »

billyt wrote: Fri May 06, 2022 8:59 am TIPS have a fixed nominal yield. The principal is adjusted for inflation according to the CPI. That's where the inflation protection comes from, principal plus inflation returned to you at maturity. Of course if the principal goes up, the absolute value of the interest payments goes up too. Like other Treasuries, they can be issued at a discount or premium. Premium can give you a negative real yield, which could be positive nominal yield.
And the inflation adjustment has a three-month lag. A TIPS maturing in August will have its inflation adjustment for the next three months based on February-April inflation, not the May-July inflation which will actually affect the investor's purchasing power.

This causes unusual spreads to inflation in the yields of shorter-term TIPS. In the example above, if inflation in the previous quarter was 2% and inflation in the next quarter is expected to be 1%, the adjustment would fall short of inflation by 1%, and the TIPS would have to have an annual yield 4% higher than the real annual yield to make up for it.
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Re: TIPs: The final year in the life of a 5 year TIP

Post by grok87 »

update for may 20th


Date Price (Ask) Real yield Spread to treasuries Index factor Price inc. index factor
4/14/2022 103.829 -3.26% -5.05% 1.13773 118.12936817
4/19/2022 103.835 -3.172% -5.086% 1.13842 118.207840
5/5/2022 103.203 -2.735% -4.81% 1.14615 118.286118
5/20/22 103.145 -2.815% -4.755% 1.15304 118.930

cheers,
grok
RIP Mr. Bogle.
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Re: TIPs: The final year in the life of a 5 year TIP

Post by grok87 »

update for june 6th

Date Price (Ask) Real yield Spread to treasuries Index factor Price inc. index factor
4/14/2022 103.829 -3.26% -5.05% 1.13773 118.12936817
4/19/2022 103.835 -3.172% -5.086% 1.13842 118.207840
5/5/2022 103.203 -2.735% -4.81% 1.14615 118.286118
5/20/22 103.145 -2.815% -4.755% 1.15304 118.930
6/6/22 102.960 -2.782% -4.931% 1.15897 119.327551

nothing too surprising here: price continues to grind toward par. it's a litle surprising the spread to treasuries- which is sort of but not quite the breakeven inflation because of the 3 month lag- has increased. that's a little surprising to me but may relate to seasonality.

Index factor has increased by 0.51429% (1.15897/1.15304) for the 17 days since i last posted. that seems a little high. it seems to annualize to 11.64% since 1.0051429^(365/17) = 1.1164. i suppose this might be the seasonality of CPI rearing its ugly (actually beautiful in this case) head?

cheers,
grok
RIP Mr. Bogle.
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Re: TIPs: The final year in the life of a 5 year TIP

Post by FactualFran »

grok87 wrote: Tue Jun 07, 2022 6:56 am Index factor has increased by 0.51429% (1.15897/1.15304) for the 17 days since i last posted. that seems a little high. it seems to annualize to 11.64% since 1.0051429^(365/17) = 1.1164. i suppose this might be the seasonality of CPI rearing its ugly (actually beautiful in this case) head?
The index factor is calculated using month-to-month changes in the CPI-U. The daily inflation indexing for May 2022 was calculated using the CPI-U values for February 2022 (283.716) and March 2022 (287.504). A monthly change of 1.34%. With the inflation indexing for June 2022, the monthly change was 0.56%.
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Re: TIPs: The final year in the life of a 5 year TIP

Post by Kevin M »

grok87 wrote: Tue Jun 07, 2022 6:56 am update for june 6th

Date Price (Ask) Real yield Spread to treasuries Index factor Price inc. index factor
4/14/2022 103.829 -3.26% -5.05% 1.13773 118.12936817
4/19/2022 103.835 -3.172% -5.086% 1.13842 118.207840
5/5/2022 103.203 -2.735% -4.81% 1.14615 118.286118
5/20/22 103.145 -2.815% -4.755% 1.15304 118.930
6/6/22 102.960 -2.782% -4.931% 1.15897 119.327551

nothing too surprising here: price continues to grind toward par. it's a litle surprising the spread to treasuries- which is sort of but not quite the breakeven inflation because of the 3 month lag- has increased. that's a little surprising to me but may relate to seasonality.

Index factor has increased by 0.51429% (1.15897/1.15304) for the 17 days since i last posted. that seems a little high. it seems to annualize to 11.64% since 1.0051429^(365/17) = 1.1164. i suppose this might be the seasonality of CPI rearing its ugly (actually beautiful in this case) head?

cheers,
grok
Below are charts of BEI for short-term TIPS based on quotes pulled from Fidelity on Friday afternoon. Both chose standard BEI (nom - real) and BEI using a #Cruncher formula that incorporates the latest ref CPI. The second chart uses seasonally adjusted TIPS yields in the calculations.

I've truncated vertical axis so we see more resolution at the maturity of interest.

Image

Image

For the 4/15/2023 TIPS, yield is -2.77% and SA yield is -2.95%. Nominal yield used for comparison is 2.19%.

BEI (#Cruncher): 4.94%
BEI (#Cruncher SA): 5.39%
BEI (std): 4.96%
BEI SA (std): 5.14%

Kevin
If I make a calculation error, #Cruncher probably will let me know.
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Re: TIPs: The final year in the life of a 5 year TIP

Post by grok87 »

Kevin M wrote: Tue Jun 07, 2022 1:46 pm
grok87 wrote: Tue Jun 07, 2022 6:56 am update for june 6th

Date Price (Ask) Real yield Spread to treasuries Index factor Price inc. index factor
4/14/2022 103.829 -3.26% -5.05% 1.13773 118.12936817
4/19/2022 103.835 -3.172% -5.086% 1.13842 118.207840
5/5/2022 103.203 -2.735% -4.81% 1.14615 118.286118
5/20/22 103.145 -2.815% -4.755% 1.15304 118.930
6/6/22 102.960 -2.782% -4.931% 1.15897 119.327551

nothing too surprising here: price continues to grind toward par. it's a litle surprising the spread to treasuries- which is sort of but not quite the breakeven inflation because of the 3 month lag- has increased. that's a little surprising to me but may relate to seasonality.

Index factor has increased by 0.51429% (1.15897/1.15304) for the 17 days since i last posted. that seems a little high. it seems to annualize to 11.64% since 1.0051429^(365/17) = 1.1164. i suppose this might be the seasonality of CPI rearing its ugly (actually beautiful in this case) head?

cheers,
grok
Below are charts of BEI for short-term TIPS based on quotes pulled from Fidelity on Friday afternoon. Both chose standard BEI (nom - real) and BEI using a #Cruncher formula that incorporates the latest ref CPI. The second chart uses seasonally adjusted TIPS yields in the calculations.

I've truncated vertical axis so we see more resolution at the maturity of interest.

Image

Image

For the 4/15/2023 TIPS, yield is -2.77% and SA yield is -2.95%. Nominal yield used for comparison is 2.19%.

BEI (#Cruncher): 4.94%
BEI (#Cruncher SA): 5.39%
BEI (std): 4.96%
BEI SA (std): 5.14%

Kevin
Thanks. I’m not sure i’m following though. At this point this bond has 10 months till it matures. The inflation adjustment for 3 of those months is known. Do any of these figures tell me what the bei is for those 7 months?
Cheers
Grok
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Re: TIPs: The final year in the life of a 5 year TIP

Post by Kevin M »

grok87 wrote: Wed Jun 08, 2022 12:26 pm
Kevin M wrote: Tue Jun 07, 2022 1:46 pm
grok87 wrote: Tue Jun 07, 2022 6:56 am update for june 6th

Date Price (Ask) Real yield Spread to treasuries Index factor Price inc. index factor
4/14/2022 103.829 -3.26% -5.05% 1.13773 118.12936817
4/19/2022 103.835 -3.172% -5.086% 1.13842 118.207840
5/5/2022 103.203 -2.735% -4.81% 1.14615 118.286118
5/20/22 103.145 -2.815% -4.755% 1.15304 118.930
6/6/22 102.960 -2.782% -4.931% 1.15897 119.327551

nothing too surprising here: price continues to grind toward par. it's a litle surprising the spread to treasuries- which is sort of but not quite the breakeven inflation because of the 3 month lag- has increased. that's a little surprising to me but may relate to seasonality.

Index factor has increased by 0.51429% (1.15897/1.15304) for the 17 days since i last posted. that seems a little high. it seems to annualize to 11.64% since 1.0051429^(365/17) = 1.1164. i suppose this might be the seasonality of CPI rearing its ugly (actually beautiful in this case) head?

cheers,
grok
Below are charts of BEI for short-term TIPS based on quotes pulled from Fidelity on Friday afternoon. Both chose standard BEI (nom - real) and BEI using a #Cruncher formula that incorporates the latest ref CPI. The second chart uses seasonally adjusted TIPS yields in the calculations.

I've truncated vertical axis so we see more resolution at the maturity of interest.

Image

Image

For the 4/15/2023 TIPS, yield is -2.77% and SA yield is -2.95%. Nominal yield used for comparison is 2.19%.

BEI (#Cruncher): 4.94%
BEI (#Cruncher SA): 5.39%
BEI (std): 4.96%
BEI SA (std): 5.14%

Kevin
Thanks. I’m not sure i’m following though. At this point this bond has 10 months till it matures. The inflation adjustment for 3 of those months is known. Do any of these figures tell me what the bei is for those 7 months?
Cheers
Grok
As of today, the latest ref CPI we have is for July 1 (based on April CPI; in 2 days we will have it for Aug 1 based on May CPI). So we only know the inflation adjustment for the rest of June as of today, not three months.

The "#Cruncher" values (BEI and BEI SA on the charts) incorporate the latest ref CPI (July 1) into the BEI calculations. The seasonally adjusted #Cruncher value probably is the most meaningful.

Kevin
If I make a calculation error, #Cruncher probably will let me know.
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Re: TIPs: The final year in the life of a 5 year TIP

Post by grok87 »

Kevin M wrote: Wed Jun 08, 2022 2:09 pm
As of today, the latest ref CPI we have is for July 1 (based on April CPI; in 2 days we will have it for Aug 1 based on May CPI). So we only know the inflation adjustment for the rest of June as of today, not three months.

The "#Cruncher" values (BEI and BEI SA on the charts) incorporate the latest ref CPI (July 1) into the BEI calculations. The seasonally adjusted #Cruncher value probably is the most meaningful.

Kevin
thanks
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Re: TIPs: The final year in the life of a 5 year TIP

Post by grok87 »

update for june 21
Date Price (Ask) Real yield Spread to treasuries Index factor Price inc. index factor
4/14/2022 103.829 -3.26% -5.05% 1.13773 118.12936817
4/19/2022 103.835 -3.172% -5.086% 1.13842 118.207840
5/5/2022 103.203 -2.735% -4.81% 1.14615 118.286118
5/20/22 103.145 -2.815% -4.755% 1.15304 118.930
6/6/22 102.960 -2.782% -4.931% 1.15897 119.327551
6/21/22 102.289 -2.156% -4.895% 1.1622 118.754

nothing too surprising here.
price continues to drop toward 100 where it will be at maturity and real yield to rise to 0.625%. spread to treasuries pretty much unchanged.
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Re: TIPs: The final year in the life of a 5 year TIP

Post by grok87 »

update for July 10

Code: Select all

Date	       Price Real_yield	Spread	Index	Price_w_Index
04/14/22	103.829	-3.26%	-5.05%	1.13773	118.1294
04/19/22	103.835	-3.17%	-5.09%	1.13842	118.2078
05/05/22	103.203	-2.74%	-4.81%	1.14615	118.2861
05/20/22	103.145	-2.82%	-4.76%	1.15304	118.9300
06/06/22	102.96	-2.78%	-4.93%	1.15897	119.3276
06/21/22	102.289	-2.16%	-4.90%	1.16220	118.7540
07/09/22	101.193	-0.93%	-3.85%	1.16806	117.8940

Price down 1.07% and real yield down 1.23% points which i think is what one would expect for a bond with real duration of about 0.75 years.
i think the driver of the yield and price change was the drop in the spread to treasuries. this is similar to breakeven inflation but includes some known past inflation numbers due to the 3 month lag.

this sort of volatile change is what i was expecting when i started this thread. With 20/20 hindsight i guess i should have sold at the beginning of JUne?
cheers,
grok
RIP Mr. Bogle.
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Re: TIPs: The final year in the life of a 5 year TIP

Post by TheTimeLord »

grok87 wrote: Sat Jul 09, 2022 6:26 am update for July 10

Code: Select all

Date	       Price Real_yield	Spread	Index	Price_w_Index
04/14/22	103.829	-3.26%	-5.05%	1.13773	118.1294
04/19/22	103.835	-3.17%	-5.09%	1.13842	118.2078
05/05/22	103.203	-2.74%	-4.81%	1.14615	118.2861
05/20/22	103.145	-2.82%	-4.76%	1.15304	118.9300
06/06/22	102.96	-2.78%	-4.93%	1.15897	119.3276
06/21/22	102.289	-2.16%	-4.90%	1.16220	118.7540
07/09/22	101.193	-0.93%	-3.85%	1.16806	117.8940

Price down 1.07% and real yield down 1.23% points which i think is what one would expect for a bond with real duration of about 0.75 years.
i think the driver of the yield and price change was the drop in the spread to treasuries. this is similar to breakeven inflation but includes some known past inflation numbers due to the 3 month lag.

this sort of volatile change is what i was expecting when i started this thread. With 20/20 hindsight i guess i should have sold at the beginning of JUne?
cheers,
grok
Sorry if this was addressed earlier in the thread but why sell, why not just let it mature collect whatever yield is coming plus the inflated principal value?
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Re: TIPs: The final year in the life of a 5 year TIP

Post by grok87 »

TheTimeLord wrote: Sat Jul 09, 2022 6:31 am
grok87 wrote: Sat Jul 09, 2022 6:26 am update for July 10

Code: Select all

Date	       Price Real_yield	Spread	Index	Price_w_Index
04/14/22	103.829	-3.26%	-5.05%	1.13773	118.1294
04/19/22	103.835	-3.17%	-5.09%	1.13842	118.2078
05/05/22	103.203	-2.74%	-4.81%	1.14615	118.2861
05/20/22	103.145	-2.82%	-4.76%	1.15304	118.9300
06/06/22	102.96	-2.78%	-4.93%	1.15897	119.3276
06/21/22	102.289	-2.16%	-4.90%	1.16220	118.7540
07/09/22	101.193	-0.93%	-3.85%	1.16806	117.8940

Price down 1.07% and real yield down 1.23% points which i think is what one would expect for a bond with real duration of about 0.75 years.
i think the driver of the yield and price change was the drop in the spread to treasuries. this is similar to breakeven inflation but includes some known past inflation numbers due to the 3 month lag.

this sort of volatile change is what i was expecting when i started this thread. With 20/20 hindsight i guess i should have sold at the beginning of JUne?
cheers,
grok
Sorry if this was addressed earlier in the thread but why sell, why not just let it mature collect whatever yield is coming plus the inflated principal value?
I think i am planning to let it mature.

But as per my original post some short term tips funds actually sell once the tips have less than 1 year left to maturity. other hold to maturity. it wasn't clear to me why there are the different strategies. So i'm asking myself - are TIPS with <1 year maturity a good investment? by which i mean is the expected return worth the risk?

With a tbill, you know what you will get at maturity. With a say 9 month tip you don't. it depends on the inflation index values. and those are not seasonally adjusted so weird things can happen- maybe even deflation?

cheers,
grok
RIP Mr. Bogle.
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Re: TIPs: The final year in the life of a 5 year TIP

Post by martincmartin »

grok87 wrote: Sat Jul 09, 2022 6:59 am With a tbill, you know what you will get at maturity. With a say 9 month tip you don't. it depends on the inflation index values. and those are not seasonally adjusted so weird things can happen- maybe even deflation?
Interesting, as I see it the exact opposite. :) To me money is just a means to an end, to buy things. With a T bill I don't know how much I can buy when it matures, since that also depends on inflation. With a TIPS I do. For example, you can make a liability matching portfolio with a TIPS ladder, and know what purchasing power you'll have in the future. Not true with regular Treasuries.
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Re: TIPs: The final year in the life of a 5 year TIP

Post by grok87 »

martincmartin wrote: Sat Jul 09, 2022 10:23 am
grok87 wrote: Sat Jul 09, 2022 6:59 am With a tbill, you know what you will get at maturity. With a say 9 month tip you don't. it depends on the inflation index values. and those are not seasonally adjusted so weird things can happen- maybe even deflation?
Interesting, as I see it the exact opposite. :) To me money is just a means to an end, to buy things. With a T bill I don't know how much I can buy when it matures, since that also depends on inflation. With a TIPS I do. For example, you can make a liability matching portfolio with a TIPS ladder, and know what purchasing power you'll have in the future. Not true with regular Treasuries.
it's a good point. In general i would actually agree. but with non-seasonally adjusted CPI (which is what TIPS use) unusual things can happen. from Oct 2019 to december 2019 cpi declined by 0.65% Now if this sort of thing happens to a 10 year TIP it is no big deal because you'll likely get the benefit of upward blips in inflation over the course of the 10 years. but if your TIP matures in December 2019 that's another story.
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Re: TIPs: The final year in the life of a 5 year TIP

Post by Kevin M »

grok87 wrote: Sat Jul 09, 2022 12:33 pm
martincmartin wrote: Sat Jul 09, 2022 10:23 am
grok87 wrote: Sat Jul 09, 2022 6:59 am With a tbill, you know what you will get at maturity. With a say 9 month tip you don't. it depends on the inflation index values. and those are not seasonally adjusted so weird things can happen- maybe even deflation?
Interesting, as I see it the exact opposite. :) To me money is just a means to an end, to buy things. With a T bill I don't know how much I can buy when it matures, since that also depends on inflation. With a TIPS I do. For example, you can make a liability matching portfolio with a TIPS ladder, and know what purchasing power you'll have in the future. Not true with regular Treasuries.
it's a good point. In general i would actually agree. but with non-seasonally adjusted CPI (which is what TIPS use) unusual things can happen. from Oct 2019 to december 2019 cpi declined by 0.65% Now if this sort of thing happens to a 10 year TIP it is no big deal because you'll likely get the benefit of upward blips in inflation over the course of the 10 years. but if your TIP matures in December 2019 that's another story.
How did you calculate the 0.65% decline?

CPIAUCNS (not seasonally adjusted) for 12/2019 was 256.974 and for 10/2019 it was 257.346, and 256.974/257.346-1 = -0.14%.

CPIAUCSL (seasonally adjusted) change for same period was +0.37%.

This is a reason to pay attention to seasonally adjusted TIPS yields, since they rationalize TIPS nominal returns at shorter maturities. Not that you can do anything about it if you already own the TIPS, but I would pay attention to it when buying TIPS of shorter maturities.

Also, December inflation would be used for the March 1 reference CPI, so would affect TIPS maturing Feb 15. The only TIPS maturing on 2/15 are long-term TIPS, the shortest maturity being 2/15/2040.

Once we know the index ratio for the maturity date (e.g., you will know the 2/15/2023 IRs in early Jan when the December CPI numbers are released), the TIPS will trade like a nominal Treasury, but we won't have to worry about 2/15 maturities for about 18 years. The 7/15/2022 TIPS now is trading more like a nominal 7/15/2022 Treasury.

Your 4/15/2023 TIPS will be trading like a nominal Treasury when the Feb CPI numbers are released in the second week of March 2023.

Also, the seasonal adjustment is significant now for that TIPS. The Friday ask yield was -0.91%, but the seasonally-adjusted ask yield was -1.41%.

Image

Note that there is almost no seasonal adjustment for the 7/15/2023 TIPS, since settlement date of 7/11 (Monday) is close to 7/15, on which date the seasonal adjustment will be exactly 0. Once we get to April 2023, there will be almost no seasonal adjustment for your TIPS.

Kevin
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Re: TIPs: The final year in the life of a 5 year TIP

Post by Kevin M »

grok87 wrote: Fri Apr 15, 2022 8:45 am I own a TIPs bond that will mature 1 year from today- i.e. 4/15/2023. In this thread i plan to track what happens over the next year.
<snip>
So are they are worthwhile investment or not? Should i be selling like VIPSX and SCHP are? or holding like VTAPX and STIP do?
<snip>
For whatever reason, I haven't bought any of this one yet, but I do own 50 of the 7/15/2023, and I recently added 20 of the 1/15/2023 (about 6 months), so I have come to the conclusion that owning maturities as short as six months makes sense for me. I just pay attention to the seasonally adjusted yields and breakeven inflation rates, since they can have a significant impact, depending on how close settlement is to maturity.

The 4/15/2023 might be a worthwhile addition, since the seasonally-adjusted (SA) yield is -1.41% compared to -2.69% for the 1/15/2023, so 128 basis points of extra yield for 3 months, which is 518 bps per year of extra yield; i.e., very steep SA yield curve in this range.

Kevin
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Re: TIPs: The final year in the life of a 5 year TIP

Post by grok87 »

Kevin M wrote: Sat Jul 09, 2022 1:16 pm
grok87 wrote: Sat Jul 09, 2022 12:33 pm
martincmartin wrote: Sat Jul 09, 2022 10:23 am
grok87 wrote: Sat Jul 09, 2022 6:59 am With a tbill, you know what you will get at maturity. With a say 9 month tip you don't. it depends on the inflation index values. and those are not seasonally adjusted so weird things can happen- maybe even deflation?
Interesting, as I see it the exact opposite. :) To me money is just a means to an end, to buy things. With a T bill I don't know how much I can buy when it matures, since that also depends on inflation. With a TIPS I do. For example, you can make a liability matching portfolio with a TIPS ladder, and know what purchasing power you'll have in the future. Not true with regular Treasuries.
it's a good point. In general i would actually agree. but with non-seasonally adjusted CPI (which is what TIPS use) unusual things can happen. from Oct 2019 to december 2019 cpi declined by 0.65% Now if this sort of thing happens to a 10 year TIP it is no big deal because you'll likely get the benefit of upward blips in inflation over the course of the 10 years. but if your TIP matures in December 2019 that's another story.
How did you calculate the 0.65% decline?

CPIAUCNS (not seasonally adjusted) for 12/2019 was 256.974 and for 10/2019 it was 257.346, and 256.974/257.346-1 = -0.14%.

sorry i got the year wrong. it was for 10/2018 to 12/2018
https://fred.stlouisfed.org/series/CPIAUCNS
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Re: TIPs: The final year in the life of a 5 year TIP

Post by rockstar »

grok87 wrote: Sat Jul 09, 2022 6:26 am update for July 10

Code: Select all

Date	       Price Real_yield	Spread	Index	Price_w_Index
04/14/22	103.829	-3.26%	-5.05%	1.13773	118.1294
04/19/22	103.835	-3.17%	-5.09%	1.13842	118.2078
05/05/22	103.203	-2.74%	-4.81%	1.14615	118.2861
05/20/22	103.145	-2.82%	-4.76%	1.15304	118.9300
06/06/22	102.96	-2.78%	-4.93%	1.15897	119.3276
06/21/22	102.289	-2.16%	-4.90%	1.16220	118.7540
07/09/22	101.193	-0.93%	-3.85%	1.16806	117.8940

Price down 1.07% and real yield down 1.23% points which i think is what one would expect for a bond with real duration of about 0.75 years.
i think the driver of the yield and price change was the drop in the spread to treasuries. this is similar to breakeven inflation but includes some known past inflation numbers due to the 3 month lag.

this sort of volatile change is what i was expecting when i started this thread. With 20/20 hindsight i guess i should have sold at the beginning of JUne?
cheers,
grok
Bond market volatile has increased over the last year. This isn't really normal.
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BlueEars
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Re: TIPs: The final year in the life of a 5 year TIP

Post by BlueEars »

grok87 wrote: Fri Apr 15, 2022 8:45 am I own a TIPs bond that will mature 1 year from today- i.e. 4/15/2023. In this thread i plan to track what happens over the next year.
...
cheers,
grok
I also own a slug of these 4/15/23 TIPS which were suppose to have a real yield of +1.05% to maturity when I purchased them in October 2018. Now new 5 yr TIPS are yielding about +0.5%. I would like to extend the maturity if they get up to +1.0% by selling the 4/15/2023 TIPS and buying fresher 5 yr TIPS.

Does selling these to buy newer 5 yr TIPS instead of waiting to maturity make sense?

P.S. Sorry, I do not mean to hijack this thread but it seems like a relevant question.
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Kevin M
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Re: TIPs: The final year in the life of a 5 year TIP

Post by Kevin M »

BlueEars wrote: Tue Jul 12, 2022 11:10 am
grok87 wrote: Fri Apr 15, 2022 8:45 am I own a TIPs bond that will mature 1 year from today- i.e. 4/15/2023. In this thread i plan to track what happens over the next year.
...
cheers,
grok
I also own a slug of these 4/15/23 TIPS which were suppose to have a real yield of +1.05% to maturity when I purchased them in October 2018. Now new 5 yr TIPS are yielding about +0.5%. I would like to extend the maturity if they get up to +1.0% by selling the 4/15/2023 TIPS and buying fresher 5 yr TIPS.

Does selling these to buy newer 5 yr TIPS instead of waiting to maturity make sense?

P.S. Sorry, I do not mean to hijack this thread but it seems like a relevant question.
You'll lose something to the bid/ask spread. Currently for best price/yield for 4/15/2023 is ask 100.832, -0.471%; bid 100.664, -0.251%. So you get the bid for this, and pay the ask for the new issue.

I also bought some of the 4/15/2023 yesterday (settles today), and yield is about 30 basis points higher today.

Kevin
If I make a calculation error, #Cruncher probably will let me know.
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grok87
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Re: TIPs: The final year in the life of a 5 year TIP

Post by grok87 »

update for July 21

Code: Select all

Date	Price	Real_yield	Spread	Index	Price_w_Index
04/14/22	103.829	-3.26%	-5.05%	1.13773	118.1294
04/19/22	103.835	-3.17%	-5.09%	1.13842	118.2078
05/05/22	103.203	-2.74%	-4.81%	1.14615	118.2861
05/20/22	103.145	-2.82%	-4.76%	1.15304	118.9300
06/06/22	102.960	-2.78%	-4.93%	1.15897	119.3276
06/21/22	102.289	-2.16%	-4.90%	1.16220	118.7540
07/09/22	101.193	-0.93%	-3.85%	1.16806	117.8940
07/21/22	100.981	-0.72%	-3.66%	1.17386	118.5376
9 month tbill is at 2.93% which explains the -3.66% spread to treasuries given this tip now has a real yield of -0.72%
https://www.bloomberg.com/markets/rates ... t-bonds/us
if inflation comes in at 3.66% annualized rate then for 9 months that is 2.7% which would push the price plus index at maturity to 121.77%
we'll see what actually happens
cheers,
grok
RIP Mr. Bogle.
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Kevin M
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Re: TIPs: The final year in the life of a 5 year TIP

Post by Kevin M »

grok87 wrote: Fri Jul 22, 2022 6:27 pm update for July 21

Code: Select all

Date	Price	Real_yield	Spread	Index	Price_w_Index
04/14/22	103.829	-3.26%	-5.05%	1.13773	118.1294
04/19/22	103.835	-3.17%	-5.09%	1.13842	118.2078
05/05/22	103.203	-2.74%	-4.81%	1.14615	118.2861
05/20/22	103.145	-2.82%	-4.76%	1.15304	118.9300
06/06/22	102.960	-2.78%	-4.93%	1.15897	119.3276
06/21/22	102.289	-2.16%	-4.90%	1.16220	118.7540
07/09/22	101.193	-0.93%	-3.85%	1.16806	117.8940
07/21/22	100.981	-0.72%	-3.66%	1.17386	118.5376
9 month tbill is at 2.93% which explains the -3.66% spread to treasuries given this tip now has a real yield of -0.72%
https://www.bloomberg.com/markets/rates ... t-bonds/us
if inflation comes in at 3.66% annualized rate then for 9 months that is 2.7% which would push the price plus index at maturity to 121.77%
we'll see what actually happens
cheers,
grok
The seasonal adjustment is significant for this TIPS. The ask yield I pulled from Fidelity yesterday was -0.76%, which is a seasonally-adjusted -1.34%.

The 4/15/2023 nominal yield I got was 3.00%, so standard BEI is 3.76 percentage points. The seasonally-adjusted #Cruncher BEI is 2.49 pp.

Kevin
If I make a calculation error, #Cruncher probably will let me know.
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grok87
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Re: TIPs: The final year in the life of a 5 year TIP

Post by grok87 »

Kevin M wrote: Fri Jul 22, 2022 7:13 pm
grok87 wrote: Fri Jul 22, 2022 6:27 pm update for July 21

Code: Select all

Date	Price	Real_yield	Spread	Index	Price_w_Index
04/14/22	103.829	-3.26%	-5.05%	1.13773	118.1294
04/19/22	103.835	-3.17%	-5.09%	1.13842	118.2078
05/05/22	103.203	-2.74%	-4.81%	1.14615	118.2861
05/20/22	103.145	-2.82%	-4.76%	1.15304	118.9300
06/06/22	102.960	-2.78%	-4.93%	1.15897	119.3276
06/21/22	102.289	-2.16%	-4.90%	1.16220	118.7540
07/09/22	101.193	-0.93%	-3.85%	1.16806	117.8940
07/21/22	100.981	-0.72%	-3.66%	1.17386	118.5376
9 month tbill is at 2.93% which explains the -3.66% spread to treasuries given this tip now has a real yield of -0.72%
https://www.bloomberg.com/markets/rates ... t-bonds/us
if inflation comes in at 3.66% annualized rate then for 9 months that is 2.7% which would push the price plus index at maturity to 121.77%
we'll see what actually happens
cheers,
grok
The seasonal adjustment is significant for this TIPS. The ask yield I pulled from Fidelity yesterday was -0.76%, which is a seasonally-adjusted -1.34%.

The 4/15/2023 nominal yield I got was 3.00%, so standard BEI is 3.76 percentage points. The seasonally-adjusted #Cruncher BEI is 2.49 pp.

Kevin
thanks, that's very helpful. i feel better holding at a 2.49% BEI than a 3.66% BEI.
RIP Mr. Bogle.
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