Trading Treasuries (nominal and TIPS)

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zero_coupon
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Re: Trading Treasuries (nominal and TIPS)

Post by zero_coupon »

Kevin M wrote: Thu May 26, 2022 2:17 pmI just looked, and see only 2 CDs at Fidelity on the secondary market with maturity between 04/2024 and 06/2024 (so about two years) and a yield of > 2.9%...
If one purchases a brokered CD at Fidelity, does the issuer gain access to one's personal info? Similarly, where is one's information spread when a Treasury is purchased either on the secondary market or at auction?

Also, is the Fidelity website superior to the Fidelity mobile app for trading Treasurys and brokered CDs?
dbs
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Re: Trading Treasuries (nominal and TIPS)

Post by dbs »

I just purchased earlier today my first tbill on Vanguard. I purchased a 3 month bill at auction when they were listed today, hitting the buy button next to the 13 week bill. Yet in my pending orders it is showing what looks like a 6 month tbill that was issued in April. Is this normal to have the wrong info while pending? It shouldn’t even be possible to order this bill at auction right?

Name U S TREASURY BILL 0% 10/27/22 04/28/22
CUSIP number 912796V71

EDIT: I found the explanation, it is an inner working I don’t understand but it is the correct three month bill.

https://www.marketwatch.com/amp/story/u ... 1658415648

“The debt will settle on July 28, 2022 and will mature Oct. 27, 2022.

The debt is a reopening of an issue first sold on April 28, 2022.”
protagonist
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Re: Trading Treasuries (nominal and TIPS)

Post by protagonist »

Doc wrote: Wed Jul 20, 2022 2:04 pm
Kevin M wrote: Wed Jul 20, 2022 12:28 pm
Doc wrote: Wed Jul 20, 2022 10:42 am Not futile at all. It's very easy to take the risk out of investing. Just have a portfolio that is all T-bills.

If you also want good return that is an additional factor. :D
T bills are only riskless for short-term nominal liabilities. They are quite risky for long-term real liabilities. The only risk T bills minimize is price risk. That doesn't mean I don't like T bills--I'm just aware of the reinvestment and inflation risks, so don't consider them riskless for most of my future spending needs.

In terms of rebalancing, long term Treasuries provided much higher rebalancing bonuses than T bills in late 2008, so if that's your rebalancing yardstick, you would go with longer-term Treasuries.

Kevin
"T bills are only riskless for short-term nominal liabilities. They are quite risky for long-term real liabilities."

OK. But I think of the liability of a loss of something I already own. Not something I might have in the future. I would agree that using T-bills for future unknown liabilities is not riskless because the T-bills need to be rolled.

"In terms of rebalancing, long term Treasuries provided much higher rebalancing bonuses than T bills in late 2008, so if that's your rebalancing yardstick, you would go with longer-term Treasuries."

Agreed. But longer term Treasuries were much, much better than the same maturity TIPS back then. Which some of us learned the hard way mainly because TIPS were NOT "just like nominals except for the inflation protection" which was the Boglehead dogma at the time.

We tend to go in different directions in discussions when we talk about the future. Are we talking about the risk in the Treasury or in the the risk in what we might want to buy with those Treasury. The two objectives often get cross wired.
protagonist
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Re: Trading Treasuries (nominal and TIPS)

Post by protagonist »

Two thoughts on this.
One....a single random historical point is pretty useless.
Two, if you hold to maturity, TIPS have a negligable downside and a known upside, whereas nominals, especially long term nominals, have a huge potential downside if high inflation persists..that potential downside increases as a function of increasing term. Even if it just stays at 9% for a few years, and do you really have that much faith that it will not increase? If so you probably are too young to remember the late 70s/early 80s, which was hardly the worst possible inflation scenario.

Not to mention that nominals are hitting the ground already with a big downside...at least if you extrapolate year over year data....not statistically valid I know but it is all we know.
And though hyperinflation is very unlikely it is not an impossibility.
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TheTimeLord
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Re: Trading Treasuries (nominal and TIPS)

Post by TheTimeLord »

Very busy morning, made double digit trades, completed my TIPS ladder and my Liquidity ladder while selling lots of T-Bills maturing in 2022 to finance much of the activity. The liquidity I found when selling T-Bills was good.
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Doc
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Re: Trading Treasuries (nominal and TIPS)

Post by Doc »

protagonist wrote: Fri Jul 22, 2022 9:20 am Two thoughts on this.
One....a single random historical point is pretty useless.
Two, if you hold to maturity, TIPS have a negligable downside and a known upside, whereas nominals, especially long term nominals, have a huge potential downside if high inflation persists..that potential downside increases as a function of increasing term.
Third thought coming.

"One" - agree.
"Two" - agree

Three:
Nominals: Constant "coupon" and constant price at maturity.
TIPS: Constant "coupon" and increased price at maturity.
T-bill's: Increasing "coupon" and constant price at maturity.

If you reinvest coupons the T-bills get a boost because their "coupon" is increasing.

Will rolling your 4 wk. T-bill have a higher return in 2 years? Probably not. We expect lower return from T-bills because they have lower risk.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.
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Kevin M
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

zero_coupon wrote: Fri Jul 22, 2022 2:16 am If one purchases a brokered CD at Fidelity, does the issuer gain access to one's personal info? Similarly, where is one's information spread when a Treasury is purchased either on the secondary market or at auction?

Also, is the Fidelity website superior to the Fidelity mobile app for trading Treasurys and brokered CDs?
I don't believe your information goes any further than the broker for either of your scenarios.

The Fidelity website probably is superior, since there is more screen space. I have never used the mobile app to trade.
If I make a calculation error, #Cruncher probably will let me know.
zero_coupon
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Re: Trading Treasuries (nominal and TIPS)

Post by zero_coupon »

Kevin M wrote: Fri Jul 22, 2022 12:50 pm
zero_coupon wrote: Fri Jul 22, 2022 2:16 am If one purchases a brokered CD at Fidelity, does the issuer gain access to one's personal info? Similarly, where is one's information spread when a Treasury is purchased either on the secondary market or at auction?

Also, is the Fidelity website superior to the Fidelity mobile app for trading Treasurys and brokered CDs?
I don't believe your information goes any further than the broker for either of your scenarios.

The Fidelity website probably is superior, since there is more screen space. I have never used the mobile app to trade.
Thank you, Kevin. I hope you are correct about the personal info. Great thread!
zero_coupon
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Re: Trading Treasuries (nominal and TIPS)

Post by zero_coupon »

Kevin M wrote: Tue May 31, 2022 11:19 am
Kevin M wrote: Sun May 29, 2022 1:40 pm There is an auction of 26-week Treasury bills on Tuesday 5/31 with settlement on Thursday 6/2. This is CUSIP 912796P94, a reopening of what was originally auctioned as a 52-week bill. So, we could buy this on the secondary market on Tuesday for Wednesday settlement. Close enough.
Auction yield for this was 1.615%.

I currently see ask yield of 1.545% at Fidelity for min qty 100, with no depth of book; i.e., you can't buy less than 100.

I see ask yield of 1.558% for min qty 1 at Vanguard, and a reasonable depth of book.

Kevin
In this case, Vanguard's offer was more attractive (lower minimum, higher yield) than Fidelity's. Is that consistently the case?
zero_coupon
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Re: Trading Treasuries (nominal and TIPS)

Post by zero_coupon »

#Cruncher wrote: Mon Jun 06, 2022 4:00 pm The value of the "guarantee" isn't affected by whether you buy at auction or on the secondary market; only by the size of the index ratio at purchase. For example, if you'd bought the 5-year TIPS maturing 10/15/2026 on the secondary market 11/5/2021, one week after issuance, the index ratio would have been 1.00149 (source). The Reference CPI would therefore only have to fall about 0.15% for the face value floor to kick in. But if you'd bought the same TIPS next month at the 12/22/2021 reopening auction, the index ratio would be 1.01192 on the 12/31/2021 issue date. The Reference CPI would have to drop about 1.2% by 10/15/2026 before there would be any benefit from the face value floor.
It seems there is a disadvantage to purchasing TIPS at reopening auctions, as the index ratio may already be high at purchase, thus reducing the value of any potential deflation protection provided by the face value floor. Original openings are better.
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jeffyscott
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Re: Trading Treasuries (nominal and TIPS)

Post by jeffyscott »

zero_coupon wrote: Sat Jul 23, 2022 9:35 am
#Cruncher wrote: Mon Jun 06, 2022 4:00 pm The value of the "guarantee" isn't affected by whether you buy at auction or on the secondary market; only by the size of the index ratio at purchase. For example, if you'd bought the 5-year TIPS maturing 10/15/2026 on the secondary market 11/5/2021, one week after issuance, the index ratio would have been 1.00149 (source). The Reference CPI would therefore only have to fall about 0.15% for the face value floor to kick in. But if you'd bought the same TIPS next month at the 12/22/2021 reopening auction, the index ratio would be 1.01192 on the 12/31/2021 issue date. The Reference CPI would have to drop about 1.2% by 10/15/2026 before there would be any benefit from the face value floor.
It seems there is a disadvantage to purchasing TIPS at reopening auctions, as the index ratio may already be high at purchase, thus reducing the value of any potential deflation protection provided by the face value floor. Original openings are better.
Assuming you ascribe any meaningful value to the difference.

So in one case you are protected from deflation that exceeds a net of 0.15% over 5 years and in the other, you are protected from deflation that exceeds a net of 1.2% over 5 years. The chances of either occurring are minuscule, IMO, and the maximum net difference amounts to about 1% of your investment.

For the October auction, investors had to pay a premium of about $109.51 for about $100.14 of value, so a premium of about 9.4% and that gives a real YTM of -1.685%. At the reopening in December it was $109.43 for about 101.19 in value, so a premium of about 8.1% for a real YTM of -1.508%. The October buyer thus paid 1.3% more for that extra 1.05% in deflation protection.

https://tipswatch.com/2021/12/22/5-year ... -of-1-508/
https://tipswatch.com/2021/10/21/5-year ... -of-1-685/
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BlueEars
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Re: Trading Treasuries (nominal and TIPS)

Post by BlueEars »

Regarding nominal versus TIPS, I sometimes refer to this historical data for nominals:

Image

Does this look about right or is there better reference data?

P.S. I don't expect to get this in 5yr and 10yr bonds any time soon.
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

I have been favoring box spreads over Treasuries in my taxable account at Fidelity, since I was getting 40-50 basis points more than a Treasury of same or similar maturity. For example, last Tuesday I got one box spread with an expiration of about one month filled at 2.34%, compared to 1m Treasury yield of 1.8% at the time.

However, over the subsequent 3 days I was unable to get any box spreads with 2, 3 or 4-month expirations filled at even 27 basis point yield spread, which for me is only an 8 basis point taxable-equivalent yield (TEY) spread. So, I finally just bought 65 of the 11/15/2022 Treasury bill (CUSIP 912796YQ6) at a yield of 2.59%, which for me is a TEY of 2.94% (TEY of the 11/18/2022 box spread, if it had been filled, would have been 3.02%).

Kevin
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Kevin M
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

BlueEars wrote: Sat Jul 23, 2022 1:08 pm Regarding nominal versus TIPS, I sometimes refer to this historical data for nominals:

Image

Does this look about right or is there better reference data?

P.S. I don't expect to get this in 5yr and 10yr bonds any time soon.
I don't understand the table. It refers to real yields, but you say it's for nominals. At any rate, you can get some history at FRED. For example, here are 5-year and 10-year real yields back to 2003.

Image

There are some specific TIPS for which there is history further back.

Kevin
If I make a calculation error, #Cruncher probably will let me know.
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BlueEars
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Re: Trading Treasuries (nominal and TIPS)

Post by BlueEars »

Kevin M wrote: Sat Jul 23, 2022 1:25 pm
BlueEars wrote: Sat Jul 23, 2022 1:08 pm Regarding nominal versus TIPS, I sometimes refer to this historical data for nominals:

Image

Does this look about right or is there better reference data?

P.S. I don't expect to get this in 5yr and 10yr bonds any time soon.
I don't understand the table. It refers to real yields, but you say it's for nominals.
....
Kevin
Kevin, the data was posted in Bogleheads some years ago by Swedroe. I assume this was from calculations using nominal Treasury yields and historical inflation that resulted in, for instance, 2.3% typical real returns on 5 yr Treasuries. Of course, TIPS give us a better picture in recent times as you posted. And maybe that is all we should need but I thought maybe someone here has a better really long term historical data set ... or maybe not.
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Re: Trading Treasuries (nominal and TIPS)

Post by hoops777 »

I do not really care about the intense strategic buying of tips vs nominal,etc. and what may or may not happen.
I happily bought 6 month bills at 2.9 plus.
On that note I appreciate and admire the knowledge and work being shown here :!:
Last edited by hoops777 on Sat Jul 23, 2022 2:21 pm, edited 1 time in total.
K.I.S.S........so easy to say so difficult to do.
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Kevin M
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

BlueEars wrote: Sat Jul 23, 2022 1:41 pm
Kevin M wrote: Sat Jul 23, 2022 1:25 pm
BlueEars wrote: Sat Jul 23, 2022 1:08 pm Regarding nominal versus TIPS, I sometimes refer to this historical data for nominals:

Image

Does this look about right or is there better reference data?

P.S. I don't expect to get this in 5yr and 10yr bonds any time soon.
I don't understand the table. It refers to real yields, but you say it's for nominals.
....
Kevin
Kevin, the data was posted in Bogleheads some years ago by Swedroe. I assume this was from calculations using nominal Treasury yields and historical inflation that resulted in, for instance, 2.3% typical real returns on 5 yr Treasuries. Of course, TIPS give us a better picture in recent times as you posted. And maybe that is all we should need but I thought maybe someone here has a better really long term historical data set ... or maybe not.
Inflation data is available back to 1914. The 10-year CMT yield is available back to 1962.

Image

One could download this data, and compare year over year inflation to the 10-year yield one year earlier. This would give the realized real return, but we don't really know what the real yield was initially. That's one reason there now are TIPS.

I guess for longer time periods one could download a longer-term bond series, e.g., Shiller 10-year bond yield and CPI back to 1871. Again, one could compute the realized real returns, but not the real yields.

Kevin
If I make a calculation error, #Cruncher probably will let me know.
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Drew31
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Re: Trading Treasuries (nominal and TIPS)

Post by Drew31 »

Kevin M wrote: Sat Jul 23, 2022 2:17 pm
BlueEars wrote: Sat Jul 23, 2022 1:41 pm
Kevin M wrote: Sat Jul 23, 2022 1:25 pm
BlueEars wrote: Sat Jul 23, 2022 1:08 pm Regarding nominal versus TIPS, I sometimes refer to this historical data for nominals:

Image

Does this look about right or is there better reference data?

P.S. I don't expect to get this in 5yr and 10yr bonds any time soon.
I don't understand the table. It refers to real yields, but you say it's for nominals.
....
Kevin
Kevin, the data was posted in Bogleheads some years ago by Swedroe. I assume this was from calculations using nominal Treasury yields and historical inflation that resulted in, for instance, 2.3% typical real returns on 5 yr Treasuries. Of course, TIPS give us a better picture in recent times as you posted. And maybe that is all we should need but I thought maybe someone here has a better really long term historical data set ... or maybe not.
Inflation data is available back to 1914. The 10-year CMT yield is available back to 1962.

Image

One could download this data, and compare year over year inflation to the 10-year yield one year earlier. This would give the realized real return, but we don't really know what the real yield was initially. That's one reason there now are TIPS.

I guess for longer time periods one could download a longer-term bond series, e.g., Shiller 10-year bond yield and CPI back to 1871. Again, one could compute the realized real returns, but not the real yields.

Kevin
My understanding of the table was it shows what has been the historical real return on bonds of those maturities. So if you buy a 1yr, your historical return would be about 1.7% real. 10yr nominal, your real return would have been the 2.3%.

I think these numbers jive with what I’ve heard from other sources - bonds typically return 1-2% - historically - obviously lower now.

For me, the way I’d approach this is if real yields on TIPS are 1-2% real, I’m getting a pretty return consistent with historical averages,
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Kevin M
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

Drew31 wrote: Sat Jul 23, 2022 2:33 pm
Kevin M wrote: Sat Jul 23, 2022 2:17 pm
BlueEars wrote: Sat Jul 23, 2022 1:41 pm
Kevin M wrote: Sat Jul 23, 2022 1:25 pm
BlueEars wrote: Sat Jul 23, 2022 1:08 pm Regarding nominal versus TIPS, I sometimes refer to this historical data for nominals:

Image

Does this look about right or is there better reference data?

P.S. I don't expect to get this in 5yr and 10yr bonds any time soon.
I don't understand the table. It refers to real yields, but you say it's for nominals.
....
Kevin
Kevin, the data was posted in Bogleheads some years ago by Swedroe. I assume this was from calculations using nominal Treasury yields and historical inflation that resulted in, for instance, 2.3% typical real returns on 5 yr Treasuries. Of course, TIPS give us a better picture in recent times as you posted. And maybe that is all we should need but I thought maybe someone here has a better really long term historical data set ... or maybe not.
Inflation data is available back to 1914. The 10-year CMT yield is available back to 1962.

Image

One could download this data, and compare year over year inflation to the 10-year yield one year earlier. This would give the realized real return, but we don't really know what the real yield was initially. That's one reason there now are TIPS.

I guess for longer time periods one could download a longer-term bond series, e.g., Shiller 10-year bond yield and CPI back to 1871. Again, one could compute the realized real returns, but not the real yields.

Kevin
My understanding of the table was it shows what has been the historical real return on bonds of those maturities. So if you buy a 1yr, your historical return would be about 1.7% real. 10yr nominal, your real return would have been the 2.3%.

I think these numbers jive with what I’ve heard from other sources - bonds typically return 1-2% - historically - obviously lower now.

For me, the way I’d approach this is if real yields on TIPS are 1-2% real, I’m getting a pretty return consistent with historical averages,
I downloaded the 10-year CMT and CPI data from FRED, and calculated the year over year inflation for each month since Jan 1962. I then calculated the real 1-year return using the initial yield and subsequent 1-year inflation, using this formula:

r = (1+y)/(1+i) - 1

where r = real return, y = initial yield, and i = subsequent 1-year inflation.

Here is a chart of the calculated 1-year real returns:

Image

The average over the entire period, through June 2021 is 2.09%, so pretty close to the 2.3% in Larry's table.

Kevin
If I make a calculation error, #Cruncher probably will let me know.
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Re: Trading Treasuries (nominal and TIPS)

Post by dbr »

Kevin M wrote: Sat Jul 23, 2022 3:54 pm
I downloaded the 10-year CMT and CPI data from FRED, and calculated the year over year inflation for each month since Jan 1962. I then calculated the real 1-year return using the initial yield and subsequent 1-year inflation, using this formula:

r = (1+y)/(1+i) - 1

where r = real return, y = initial yield, and i = subsequent 1-year inflation.

Here is a chart of the calculated 1-year real returns:

Image

The average over the entire period, through June 2021 is 2.09%, so pretty close to the 2.3% in Larry's table.

Kevin
When I look at data like that it makes me think of something that has a "natural" level of 2% and something disrupted everything between 1970 and 1990 that set things into an oscillation and something around 2000 that ticked it down. Therefore we should expect a return to 2% after another up oscillation.

The problem with that is I have no idea what is "natural" about interest rates in any way. Are you aware of something?
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Re: Trading Treasuries (nominal and TIPS)

Post by BlueEars »

Maybe the idea of somewhat stable real rates is bogus.
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

dbr wrote: Sat Jul 23, 2022 4:44 pm The problem with that is I have no idea what is "natural" about interest rates in any way. Are you aware of something?
There are papers on it. Here's a Fed paper from June 2020: Measuring the Natural Rate of Interest: The Role of Inflation Expectations.

Is this the kind of thing you are looking for?
If I make a calculation error, #Cruncher probably will let me know.
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Re: Trading Treasuries (nominal and TIPS)

Post by BlueEars »

Kevin M wrote: Sat Jul 23, 2022 7:07 pm
dbr wrote: Sat Jul 23, 2022 4:44 pm The problem with that is I have no idea what is "natural" about interest rates in any way. Are you aware of something?
There are papers on it. Here's a Fed paper from June 2020: Measuring the Natural Rate of Interest: The Role of Inflation Expectations.

Is this the kind of thing you are looking for?
I was just trying to get some rule of thumb for when to consider TIPS real rates a good deal looking back at long term history.

Example, I last purchased 5 year TIPS in 2018 at +1.05% yield to maturity. At the time I told the Vanguard guy helping me that I was probably going to regret not just waiting to which he said "why would you think that". I realized that maybe this was the wrong way to think (I know, don't snicker). This January I could not get enthusiastic about negative TIP rates. It turned out to be good to wait as they are now positive but not all that great at +0.3% currently.

FWIW, I may start to buy TIPS in smaller increments instead of backing up the truck when they get (compared to recent past history) enticingly high.
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Re: Trading Treasuries (nominal and TIPS)

Post by travelintime »

Is there a way to import the inflation factor of a given TIP into excel so that it auto-refreshes? I'm not well versed in spreadsheets, so maybe I missed something, but I looked at #cruncher's spreadsheet, and it looks like data from the WSJ needs to be copied and pasted.
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Re: Trading Treasuries (nominal and TIPS)

Post by BlueEars »

travelintime wrote: Sat Jul 23, 2022 11:35 pm Is there a way to import the inflation factor of a given TIP into excel so that it auto-refreshes? I'm not well versed in spreadsheets, so maybe I missed something, but I looked at #cruncher's spreadsheet, and it looks like data from the WSJ needs to be copied and pasted.
Why not just copy it from your VG account?
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Re: Trading Treasuries (nominal and TIPS)

Post by Drew31 »

travelintime wrote: Sat Jul 23, 2022 11:35 pm Is there a way to import the inflation factor of a given TIP into excel so that it auto-refreshes? I'm not well versed in spreadsheets, so maybe I missed something, but I looked at #cruncher's spreadsheet, and it looks like data from the WSJ needs to be copied and pasted.
Yes - This link lists the TIPS which you can find by CUSIP. Then there is an option to export in .csv which you can then use in Excel. I created a Vlookup in Excel based on CUSIP that updated the inflation factor by day awhile back.


https://www.treasurydirect.gov/instit/a ... ipscpi.htm
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Drew31
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Re: Trading Treasuries (nominal and TIPS)

Post by Drew31 »

Kevin M wrote: Sat Jul 23, 2022 3:54 pm I downloaded the 10-year CMT and CPI data from FRED, and calculated the year over year inflation for each month since Jan 1962. I then calculated the real 1-year return using the initial yield and subsequent 1-year inflation, using this formula:

r = (1+y)/(1+i) - 1

where r = real return, y = initial yield, and i = subsequent 1-year inflation.

Here is a chart of the calculated 1-year real returns:

Image

The average over the entire period, through June 2021 is 2.09%, so pretty close to the 2.3% in Larry's table.

Kevin
Wow, thanks for doing this. Helpful to see the additional perspective.
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Re: Trading Treasuries (nominal and TIPS)

Post by Doc »

I sometimes like real numbers not graphs: (Sorry I can't get the chart to format well.)

https://www.treasurydirect.gov/instit/instit.htm 7/20/2

Bill CMB CUSIP Issue High Investment Price per $100
Date Rate Rate
4-Week No 912796XM6 07/19/2022 1.980% 2.011% $99.846000
8-Week No 912796XV6 07/19/2022 2.270% 2.310% $99.646889
13-Week No 912796V63 07/21/2022 2.470% 2.520% $99.375639
26-Week No 912796XS3 07/21/2022 2.910% 2.994% $98.528833
52-Week No 912796XQ7 07/14/2022 2.960% 3.070% $97.007111

From <https://www.treasurydirect.gov/instit/instit.htm> 7/20/22


Note Reopening CUSIP Issue High Interest Price per $100
Date Yield Rate
2-Year No 91282CEX5 06/30/2022 3.084% 3.000% $99.838282
3-Year No 91282CEY3 07/15/2022 3.093% 3.000% $99.735500
5-Year No 91282CEW7 06/30/2022 3.271% 3.250% $99.903859
7-Year No 91282CEV9 06/30/2022 3.280% 3.250% $99.813719
10-Year Yes 91282CEP2 07/15/2022 2.960% 2.875% $99.274623

The curve is FLAT over 13 weeks. And the Fed is upping the interest rate some 50 bps every meeting.

Stay short. Even cash? Don't need TIPS either?
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Kevin M
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

Doc wrote: Sun Jul 24, 2022 2:30 pm I sometimes like real numbers not graphs: (Sorry I can't get the chart to format well.)

https://www.treasurydirect.gov/instit/instit.htm 7/20/2

Bill CMB CUSIP Issue High Investment Price per $100
Date Rate Rate
4-Week No 912796XM6 07/19/2022 1.980% 2.011% $99.846000
8-Week No 912796XV6 07/19/2022 2.270% 2.310% $99.646889
13-Week No 912796V63 07/21/2022 2.470% 2.520% $99.375639
26-Week No 912796XS3 07/21/2022 2.910% 2.994% $98.528833
52-Week No 912796XQ7 07/14/2022 2.960% 3.070% $97.007111

<snip>

The curve is FLAT over 13 weeks. And the Fed is upping the interest rate some 50 bps every meeting.

Stay short. Even cash? Don't need TIPS either?
Here are yields up to 1-year maturity from Thursday:

Image

Not flat up to 6 months, but flattish after that, as you observed. I am staying short-term with recent purchases, the last being 65 of the 11/15/2022 bill on Friday at 2.59%. Holding off on TIPS purchases for now, since yields are lower than recent purchases.

Kevin
If I make a calculation error, #Cruncher probably will let me know.
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BlueEars
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Re: Trading Treasuries (nominal and TIPS)

Post by BlueEars »

Doc wrote: Sun Jul 24, 2022 2:30 pm ...
Stay short. Even cash? Don't need TIPS either?
Doc,

I recall the TIPS market unpleasantness in 2008. Maybe due to investors selling TIPS because other more speculative market positions were cratering and they needed cash. As I recall we were both invested in TIPS at the time. So they didn't mitigate the overall portfolio decline and actually added to it. But there was no real risk if one held to maturity. Of course, back then there was some fear of a serious depression and consequent deflation.

Now it appears you are staying away from the TIPS market. I think you are in the same age group as me.

Why not consider maybe 5 year TIPS? Why are you avoiding TIPS? Just trying to get another perspective.
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Re: Trading Treasuries (nominal and TIPS)

Post by Doc »

BlueEars wrote: Sun Jul 24, 2022 4:11 pm Now it appears you are staying away from the TIPS market. I think you are in the same age group as me.

Why not consider maybe 5 year TIPS? Why are you avoiding TIPS? Just trying to get another perspective.
Avoiding TIPS since 2008 (2009?) because:

1: Equity market crashed and TPS went with it. Nominals stayed the course and rose as was desired.

2: We don't need a liability matching protfolio.

3: TIPS return would be expected to be lower than nominals because there is a "price" to be paid for that inflation protection. There's no free lunch.
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Re: Trading Treasuries (nominal and TIPS)

Post by BlueEars »

Fair enough Doc. Maybe I will avoid overexposure to TIPS but probably not zero.
nonnie
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Re: Trading Treasuries (nominal and TIPS)

Post by nonnie »

squirrel1963 wrote: Thu Jul 21, 2022 12:19 am
nonnie wrote: Wed Jul 20, 2022 9:41 pm Kevin recommended I check out this thread. So much I don't know. Just starting with the basics, my first Treasury buy. Here's my first question (looks like I need to learn how to cut and paste properly) is why is the interest so different with the same ask yield --if there's a basic primer I need to read, please let me know:

TREASURY NOTE 25 UNITED STATES TREAS NTS AAA /
-- 2.000 11/30/
2022 99.78 2.606 1.685-
2.636 CP $500 $25,015
reverse check radio TREASURY NOTE 25 UNITED STATES TREAS SER BK-2022 AAA /
-- 0.125 11/30/
2022 99.10 2.630 1.685-
2.636 CP $31 $24,781

Here's what I see-- YTM 2.606 vs 2.630; annual interest $500 vs $31. Does that work out to $485 v. $250 if I facture in cost? Be kind, I'm just starting :-)
edit:when looking at these bonds, how does one calculate the best one to purchase.
I'm definitely not an expert, but I can give a simple answer. The YTM of a bond is determined by 5 factors:
1. Face value
2. Ask price
3. Interest rate
4. Maturity date
5. Number of payments (for a treasury bond you have two payments per year)

In the above case the bonds are somewhat identical except for:
2. Ask price
3. Interest rate

In order to get the same yield, the bond with the lower ask price will by necessity have to have lower interest.

You look up on investopedia how YTM of a bond is calculated and it will probably also help to use a YTM calculator either on the web or on the phone. I use "Eazy calculators" from fncalculator.com

Suppose a simplified example of a bond with a face value of $100, ask price $100, rate 1%, maturity in one year with annual payments. It's easy to see that you'll get:
$100+$1 on maturity, so YTM is 1%

Now take a bond with face value $100, ask price of $99 and rate 0%, 1 maturity with annual payments.
You get $100+$0 on maturity, with YTM = 1.0101%, which is nearly identical.

The arithmetic is super simple and it shows what's going on. You get a $1 profit out of $100 investment in one case, and $1 profit out of an investment of $99, so your yield is almost identical despite the terms are different.

Hope it helps.
Belated thanks. It really did help. I'm surprised you even understood the question the way I phrased it.
Continuing up the learning curve,
Nonnie
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Re: Trading Treasuries (nominal and TIPS)

Post by jeffyscott »

Doc wrote: Sun Jul 24, 2022 4:56 pm 3: TIPS return would be expected to be lower than nominals because there is a "price" to be paid for that inflation protection.
Perhaps, rather than lower returns, the "price" is things like:
1: Equity market crashed and TPS went with it. Nominals stayed the course and rose as was desired.
IOW, less liquidity

:?:
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Re: Trading Treasuries (nominal and TIPS)

Post by Doc »

jeffyscott wrote: Sun Jul 24, 2022 5:27 pm
Doc wrote: Sun Jul 24, 2022 4:56 pm 3: TIPS return would be expected to be lower than nominals because there is a "price" to be paid for that inflation protection.
Perhaps, rather than lower returns, the "price" is things like:
1: Equity market crashed and TPS went with it. Nominals stayed the course and rose as was desired.
IOW, less liquidity

:?:


We pay for car insurance, home insurance and health insurance. And we get inflation insurance for free?
:D
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Re: Trading Treasuries (nominal and TIPS)

Post by jeffyscott »

Doc wrote: Sun Jul 24, 2022 5:35 pm
jeffyscott wrote: Sun Jul 24, 2022 5:27 pm
Doc wrote: Sun Jul 24, 2022 4:56 pm 3: TIPS return would be expected to be lower than nominals because there is a "price" to be paid for that inflation protection.
Perhaps, rather than lower returns, the "price" is things like:
1: Equity market crashed and TPS went with it. Nominals stayed the course and rose as was desired.
IOW, less liquidity

:?:


We pay for car insurance, home insurance and health insurance. And we get inflation insurance for free?
:D

Not free, in exchange for illiquidity
https://www.federalreserve.gov/econres/ ... e%20common
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Re: Trading Treasuries (nominal and TIPS)

Post by dbr »

Kevin M wrote: Sat Jul 23, 2022 7:07 pm
dbr wrote: Sat Jul 23, 2022 4:44 pm The problem with that is I have no idea what is "natural" about interest rates in any way. Are you aware of something?
There are papers on it. Here's a Fed paper from June 2020: Measuring the Natural Rate of Interest: The Role of Inflation Expectations.

Is this the kind of thing you are looking for?
Thanks. I don't have enough experience in this field to judge if that answers the question. It will take some work.
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Re: Trading Treasuries (nominal and TIPS)

Post by TheTimeLord »

Doc wrote: Sun Jul 24, 2022 4:56 pm
BlueEars wrote: Sun Jul 24, 2022 4:11 pm Now it appears you are staying away from the TIPS market. I think you are in the same age group as me.

Why not consider maybe 5 year TIPS? Why are you avoiding TIPS? Just trying to get another perspective.
Avoiding TIPS since 2008 (2009?) because:

1: Equity market crashed and TPS went with it. Nominals stayed the course and rose as was desired.

2: We don't need a liability matching protfolio.

3: TIPS return would be expected to be lower than nominals because there is a "price" to be paid for that inflation protection. There's no free lunch.
Fair enough, how much do you expect nominals held to maturity to outperform their TIPS counterparts?
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Re: Trading Treasuries (nominal and TIPS)

Post by #Cruncher »

travelintime wrote: Sat Jul 23, 2022 11:35 pmIs there a way to import the inflation factor of a given TIP into excel ... ?
If you're familiar with Excel, you can calculate it yourself. Here's an extract from a spreadsheet that shows how. It calculates the inflation factor (aka "Index Ratio" [1]) for all outstanding TIPS for any date through 9/1/2022. To illustrate, the table below shows how the index ratios for four TIPS are calculated in cells E76:E79 for January 15, 2022. [2] To calculate the index ratio for any TIPS for any date 9/2/2022 - 10/1/2022 will require only adding one number, the July CPI, when the next CPI report is released August 10th.

Code: Select all

Row   Col A       Col B       Col C      Col D      Col E   Formula in Column E
 32                                       Date  1/15/2022
 33                                 Days in mo         31  =DATE(YEAR(E32),MONTH(E32)+1,1)-DATE(YEAR(E32),MONTH(E32),1)
 34                                    Prev Mo   Oct 2021  =DATE(YEAR(E32),MONTH(E32)-3,1)
 35                                    Next Mo   Nov 2021  =DATE(YEAR(E32),MONTH(E32)-2,1)
 36                                   Prev CPI    276.589  =INDEX($B$2:$M$30,YEAR(E34)-$A$2+1,MONTH(E34))
 37                                   Next CPI    277.948  =INDEX($B$2:$M$30,YEAR(E35)-$A$2+1,MONTH(E35))
 38  Coupon      Mature       Dated    Ref CPI  277.20274  =ROUND(E36+(E37-E36)*(DAY(E32)-1)/E33,5)
...
 76   0.125   1/15/2022   1/15/2012  226.33474    1.22475  =IF(AND($C76<=E$32,E$32<=$B76),ROUND(E$38/$D76,5),"")
 77   0.125   4/15/2022   4/15/2017  243.19553    1.13983   v v v
 78   0.125   7/15/2022   7/15/2012  229.96306    1.20542
 79   0.125   1/15/2023   1/15/2013  230.82203    1.20094
Follow these steps if you wish to use this spreadsheet:
  • Select All, Copy, and Paste [3] the following at cell A1 of a blank Excel sheet:

    Code: Select all

    	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
    1996	154.4	154.9	155.7	156.3	156.6	156.7	157	157.3	157.8	158.3	158.6	158.6
    1997	159.1	159.6	160	160.2	160.1	160.3	160.5	160.8	161.2	161.6	161.5	161.3
    1998	161.6	161.9	162.2	162.5	162.8	163	163.2	163.4	163.6	164	164	163.9
    1999	164.3	164.5	165	166.2	166.2	166.2	166.7	167.1	167.9	168.2	168.3	168.3
    2000	168.8	169.8	171.2	171.3	171.5	172.4	172.8	172.8	173.7	174	174.1	174
    2001	175.1	175.8	176.2	176.9	177.7	178	177.5	177.5	178.3	177.7	177.4	176.7
    2002	177.1	177.8	178.8	179.8	179.8	179.9	180.1	180.7	181	181.3	181.3	180.9
    2003	181.7	183.1	184.2	183.8	183.5	183.7	183.9	184.6	185.2	185	184.5	184.3
    2004	185.2	186.2	187.4	188	189.1	189.7	189.4	189.5	189.9	190.9	191	190.3
    2005	190.7	191.8	193.3	194.6	194.4	194.5	195.4	196.4	198.8	199.2	197.6	196.8
    2006	198.3	198.7	199.8	201.5	202.5	202.9	203.5	203.9	202.9	201.8	201.5	201.8
    2007	202.416	203.499	205.352	206.686	207.949	208.352	208.299	207.917	208.49	208.936	210.177	210.036
    2008	211.08	211.693	213.528	214.823	216.632	218.815	219.964	219.086	218.783	216.573	212.425	210.228
    2009	211.143	212.193	212.709	213.24	213.856	215.693	215.351	215.834	215.969	216.177	216.33	215.949
    2010	216.687	216.741	217.631	218.009	218.178	217.965	218.011	218.312	218.439	218.711	218.803	219.179
    2011	220.223	221.309	223.467	224.906	225.964	225.722	225.922	226.545	226.889	226.421	226.23	225.672
    2012	226.665	227.663	229.392	230.085	229.815	229.478	229.104	230.379	231.407	231.317	230.221	229.601
    2013	230.28	232.166	232.773	232.531	232.945	233.504	233.596	233.877	234.149	233.546	233.069	233.049
    2014	233.916	234.781	236.293	237.072	237.9	238.343	238.25	237.852	238.031	237.433	236.151	234.812
    2015	233.707	234.722	236.119	236.599	237.805	238.638	238.654	238.316	237.945	237.838	237.336	236.525
    2016	236.916	237.111	238.132	239.261	240.229	241.018	240.628	240.849	241.428	241.729	241.353	241.432
    2017	242.839	243.603	243.801	244.524	244.733	244.955	244.786	245.519	246.819	246.663	246.669	246.524
    2018	247.867	248.991	249.554	250.546	251.588	251.989	252.006	252.146	252.439	252.885	252.038	251.233
    2019	251.712	252.776	254.202	255.548	256.092	256.143	256.571	256.558	256.759	257.346	257.208	256.974
    2020	257.971	258.678	258.115	256.389	256.394	257.797	259.101	259.918	260.28	260.388	260.229	260.474
    2021	261.582	263.014	264.877	267.054	269.195	271.696	273.003	273.567	274.31	276.589	277.948	278.802
    2022	281.148	283.716	287.504	289.109	292.296	296.311
    2023
    2024
    
    			Date	44576	44607	44666	44757	44788	44849
    			Days in mo	=DATE(YEAR(E32),MONTH(E32)+1,1)-DATE(YEAR(E32),MONTH(E32),1)
    			Prev Mo	=DATE(YEAR(E32),MONTH(E32)-3,1)
    			Next Mo	=DATE(YEAR(E32),MONTH(E32)-2,1)
    			Prev CPI	=INDEX($B$2:$M$29,YEAR(E34)-$A$2+1,MONTH(E34))
    			Next CPI	=INDEX($B$2:$M$29,YEAR(E35)-$A$2+1,MONTH(E35))
    Coupon	Mature	Dated	Ref CPI	=ROUND(E36+(E37-E36)*(DAY(E32)-1)/E33,5)
    3.625	37452	35626	160.15484	=IF(AND($C39<=E$32,E$32<=$B39),ROUND(E$38/$D39,5),"")
    3.375	39097	35445	158.43548
    3.625	39462	35810	161.55484
    3.875	39828	36175	164
    4.25	40193	36540	168.24516
    0.875	40283	38275	189.44516
    3.5	40558	36906	174.04516
    2.375	40648	38822	198.48667
    3.375	40923	37271	177.56452
    2	41014	39187	202.9214
    3	41105	37452	179.8
    0.625	41379	39553	211.36607
    1.875	41470	37817	183.66452
    2	41654	38001	184.77419
    1.25	41744	39918	211.633
    2	41835	38183	188.49677
    1.625	42019	38367	190.94516
    0.5	42109	40283	216.7122
    1.875	42200	38548	194.50968
    2	42384	38732	198.47742
    0.125	42475	40648	220.7298
    2.5	42566	38913	201.95161
    2.375	42750	39097	201.66452
    0.125	42840	41014	227.13073
    2.625	42931	39278	207.25639
    1.625	43115	39462	209.49645
    0.125	43205	41379	231.16013
    1.375	43296	39644	215.63997
    2.125	43480	39828	214.69971
    0.125	43570	41744	234.31967
    1.875	43661	40009	213.51819
    1.375	43845	40193	216.2461
    0.125	43936	42109	234.18067
    1.25	44027	40374	218.08532
    1.125	44211	40558	218.75255
    0.125	44301	42475	237.007
    0.625	44392	40739	225.38381
    0.125	44576	40923	226.33474
    0.125	44666	42840	243.19553
    0.125	44757	41105	229.96306
    0.125	44941	41289	230.82203
    0.625	45031	43205	248.39153
    0.375	45122	41470	232.71797
    0.625	45306	41654	233.33058
    0.5	45397	43570	252.20853
    0.125	45488	41835	237.44594
    0.125	45580	43753	256.56513
    2.375	45672	38183	188.49677
    0.25	45672	42019	236.85403
    0.125	45762	43936	258.30093
    0.375	45853	42200	237.14365
    0.125	45945	44119	259.46997
    2	46037	38732	198.47742
    0.625	46037	42384	237.61129
    0.125	46127	44301	262.25027
    0.125	46218	42566	239.70132
    0.125	46310	44484	273.25771
    2.375	46402	39097	201.66452
    0.375	46402	42750	241.55919
    0.125	46492	44666	282.3464
    0.375	46583	42931	244.61839
    1.75	46767	39462	209.49645
    0.5	46767	43115	246.66571
    3.625	46858	35900	161.74
    0.75	46949	43296	251.01658
    2.5	47133	39828	214.69971
    0.875	47133	43480	252.50248
    3.875	47223	36265	164.39333
    0.25	47314	43661	255.79368
    0.125	47498	43845	257.28368
    0.125	47679	44027	256.39126
    0.125	47863	44211	260.31619
    0.125	48044	44392	268.0209
    0.125	48228	44576	277.20274
    3.375	48319	37179	177.5
    0.625	48410	44757	290.54829
    2.125	51181	40224	216.1395
    2.125	51547	40589	218.991
    0.75	51912	40954	225.96062
    0.625	52277	41320	229.911
    1.375	52642	41685	233.059
    0.75	53008	42050	235.4815
    1	53373	42415	236.94448
    0.875	53738	42781	241.3925
    1	54103	43146	246.5965
    1	54469	43511	251.6355
    0.25	54834	43876	257.09503
    0.125	55199	44242	260.3515
    0.125	55564	44607	278.375
  • Copy cell E39 down to row 127. (Cell E39 appears empty, but it does contain a formula.)
  • Copy cells E33:E127 right to column J.
  • Format for readability. Note rows 32, 34, and 35; and columns B & C below row 38 are dates.
  • For illustration the spreadsheet calculates the index ratios of all outstanding TIPS on the six interest payment dates this year. But you can change these to any dates you wish.
  • The spreadsheet shows every TIPS issued. But you can delete the rows for any you don't need.
  • For any newly issued TIPS you wish to follow, copy an existing row and replace the Coupon, Maturity, Dated Date, and Reference CPI on the Dated Date in columns A:D.
  1. For an explanation of "Reference CPI" and "Index Ratio", see the first two paragraphs of the left sidebar on this help page.
  2. The formulas refer to a table of monthly CPIs from Jan 1996 to Dec 2024 in cells A2:M30. The values were taken from this BLS web page.
  3. If you have trouble pasting, try "Paste Special" and "Text".
mikeyzito22
Posts: 870
Joined: Sat Dec 02, 2017 4:42 pm

Re: Trading Treasuries (nominal and TIPS)

Post by mikeyzito22 »

Still have a ? about this:

Bought: 125,000 of settlement account and then it settled. Then I bought:

U S TREASURY BILL CPN 0.00000 % MTD 2022-10-20 DTD 2022-04-21
Buy 125,000.0000 $99.38 Free – $124,229.39

Then in my settlement account the exact amount of the difference is available to trade in my settlement account $770.61. So I realize I bought it at a discount and had a full 125,000 in the settlement account. So this money is just left over? So, when the treasury matures, will my settlement account look like:

$125,000 plus
$770.61

Barring any trading?

Thanks!
bluewater23t
Posts: 59
Joined: Tue Jan 07, 2020 8:31 am

Re: Trading Treasuries (nominal and TIPS)

Post by bluewater23t »

mikeyzito22 wrote: Sun Jul 24, 2022 11:03 pm Still have a ? about this:

Bought: 125,000 of settlement account and then it settled. Then I bought:

U S TREASURY BILL CPN 0.00000 % MTD 2022-10-20 DTD 2022-04-21
Buy 125,000.0000 $99.38 Free – $124,229.39

Then in my settlement account the exact amount of the difference is available to trade in my settlement account $770.61. So I realize I bought it at a discount and had a full 125,000 in the settlement account. So this money is just left over? So, when the treasury matures, will my settlement account look like:

$125,000 plus
$770.61

Barring any trading?

Thanks!
No. You paid 124,229.39 for these maturing in 3 months so that will be the amount deducted from your cash account. When they mature, you will get 125,000 back which includes your interest 770.61.
User avatar
jeffyscott
Posts: 13438
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Re: Trading Treasuries (nominal and TIPS)

Post by jeffyscott »

bluewater23t wrote: Mon Jul 25, 2022 8:04 am
mikeyzito22 wrote: Sun Jul 24, 2022 11:03 pm Still have a ? about this:

Bought: 125,000 of settlement account and then it settled. Then I bought:

U S TREASURY BILL CPN 0.00000 % MTD 2022-10-20 DTD 2022-04-21
Buy 125,000.0000 $99.38 Free – $124,229.39

Then in my settlement account the exact amount of the difference is available to trade in my settlement account $770.61. So I realize I bought it at a discount and had a full 125,000 in the settlement account. So this money is just left over? So, when the treasury matures, will my settlement account look like:

$125,000 plus
$770.61

Barring any trading?

Thanks!
No. You paid 124,229.39 for these maturing in 3 months so that will be the amount deducted from your cash account. When they mature, you will get 125,000 back which includes your interest 770.61.
I think they were saying what they would have if they left the $770.61 in the settlement account. They put $125K in settlement account, then bought the T-bills for $124,229.39. They will get $125K from the T-bills at maturity and they will still have the leftover $770.61 in cash, if they have not done anything with that leftover cash in the meantime.
Tdubs
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Re: Trading Treasuries (nominal and TIPS)

Post by Tdubs »

Hi, I just want to confirm that there is no rollover option at Vanguard for T Bills--If I purchase a 6-month T bill, it will just dump back to my Vanguard account at the end of six months?

I've seen that said on other threads about Vanguard, but I just want one last confirmation before I pull the trigger. I've not done this kind of purchase before on Vanguard. In my case, I absolutely DO NOT want it to rollover.
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Doc
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Re: Trading Treasuries (nominal and TIPS)

Post by Doc »

TheTimeLord wrote: Sun Jul 24, 2022 8:48 pm
Doc wrote: Sun Jul 24, 2022 4:56 pm
BlueEars wrote: Sun Jul 24, 2022 4:11 pm Now it appears you are staying away from the TIPS market. I think you are in the same age group as me.

Why not consider maybe 5 year TIPS? Why are you avoiding TIPS? Just trying to get another perspective.
Avoiding TIPS since 2008 (2009?) because:

1: Equity market crashed and TPS went with it. Nominals stayed the course and rose as was desired.

2: We don't need a liability matching protfolio.

3: TIPS return would be expected to be lower than nominals because there is a "price" to be paid for that inflation protection. There's no free lunch.
Fair enough, how much do you expect nominals held to maturity to outperform their TIPS counterparts?
I have no idea and don't care. I haven't owned TIPS since the 2008 market crash. And we don't have a liability matching portfolio.

I have given the idea a little thought since reading your post and don't belive that you can put a numerical value on it. I expect the variability of any calculation would be very highly dependent on the start and end point of one's calculation.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.
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Kevin M
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

Tdubs wrote: Mon Jul 25, 2022 8:22 am Hi, I just want to confirm that there is no rollover option at Vanguard for T Bills--If I purchase a 6-month T bill, it will just dump back to my Vanguard account at the end of six months?

I've seen that said on other threads about Vanguard, but I just want one last confirmation before I pull the trigger. I've not done this kind of purchase before on Vanguard. In my case, I absolutely DO NOT want it to rollover.
Correct. Regardless of broker, unless you set up auto roll (which Vanguard does not offer), the proceeds of your matured Treasury will be deposited into your settlement fund.
If I make a calculation error, #Cruncher probably will let me know.
mikeyzito22
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Re: Trading Treasuries (nominal and TIPS)

Post by mikeyzito22 »

jeffyscott wrote: Mon Jul 25, 2022 8:21 am
bluewater23t wrote: Mon Jul 25, 2022 8:04 am
mikeyzito22 wrote: Sun Jul 24, 2022 11:03 pm Still have a ? about this:

Bought: 125,000 of settlement account and then it settled. Then I bought:

U S TREASURY BILL CPN 0.00000 % MTD 2022-10-20 DTD 2022-04-21
Buy 125,000.0000 $99.38 Free – $124,229.39

Then in my settlement account the exact amount of the difference is available to trade in my settlement account $770.61. So I realize I bought it at a discount and had a full 125,000 in the settlement account. So this money is just left over? So, when the treasury matures, will my settlement account look like:

$125,000 plus
$770.61

Barring any trading?

Thanks!
No. You paid 124,229.39 for these maturing in 3 months so that will be the amount deducted from your cash account. When they mature, you will get 125,000 back which includes your interest 770.61.
I think they were saying what they would have if they left the $770.61 in the settlement account. They put $125K in settlement account, then bought the T-bills for $124,229.39. They will get $125K from the T-bills at maturity and they will still have the leftover $770.61 in cash, if they have not done anything with that leftover cash in the meantime.
Yes, Precisely. That's what I figured. So the 770.61 was left over and I will get 125,000 when it matures. Thanks!
RubyTuesday
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Re: Trading Treasuries (nominal and TIPS)

Post by RubyTuesday »

Is my understanding of today’s auction results for 26-week and 2-year treasuries accurate, they are basically yielding the same, 3.005% and 3.015%?
Term: 26-Week
High Rate: 2.920%
Investment Rate*: 3.005%
Price: $98.523778
Allotted at High: 18.17%
Total Tendered: $138,441,597,000
Total Accepted: $47,787,404,000
Issue Date: 07/28/2022
Maturity Date: 01/26/2023
CUSIP: 912796S34
Description: 2-Year Note
Term: 2-Year
Series: BE-2024
Interest Rate: 3%
High Yield: 3.015%
Price: $99.971015
Allotted at High: 6.49%
Accrued Interest*: $0.08152
Total Tendered: $120,135,163,900
Total Accepted: $48,904,336,300
Issue Date: 08/01/2022
Dated Date: 07/31/2022
Original Issue Date: 08/01/2022
Maturity Date: 07/31/2024
CUSIP: 91282CFA4
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Average Investor
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Re: Trading Treasuries (nominal and TIPS)

Post by Average Investor »

Hi everyone,

I just recently started buying new issue treasury bills on Schwab to build a rolling ladder out to 12 months. I understand I am going to get whatever rate is determined by auction. This seems sufficient to me (simple and easy to administer), is there any compelling reason I should look at secondary issues?

Thank you.
Tomorrow never knows.
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

RubyTuesday wrote: Mon Jul 25, 2022 12:16 pm Is my understanding of today’s auction results for 26-week and 2-year treasuries accurate, they are basically yielding the same, 3.005% and 3.015%?
Yes. The yield curve is quite flat between 6-month and 2-year maturities. The chart below is from ask yields pulled from Fidelity today.

Image

Kevin
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Re: Trading Treasuries (nominal and TIPS)

Post by Doc »

Average Investor wrote: Mon Jul 25, 2022 1:30 pm Hi everyone,

I just recently started buying new issue treasury bills on Schwab to build a rolling ladder out to 12 months. I understand I am going to get whatever rate is determined by auction. This seems sufficient to me (simple and easy to administer), is there any compelling reason I should look at secondary issues?

Thank you.
There may be a very small price disadvantage for small quantities. You can see the info on Schwab's site.

The main difference is that if you buy up to 26 weeks at auction you set them to auto roll if that's what you want.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.
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