Trading Treasuries (nominal and TIPS)

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Kevin M
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Re: VTAPX holdings vs. my TIPS holdings1

Post by Kevin M »

protagonist wrote: Sat Sep 24, 2022 6:01 pm
Kevin M wrote: Fri Sep 23, 2022 12:00 pm My view is that the Fed will succeed in bringing inflation down to the 2% level over the next few years (I think the market may be coming around to this view), so I have been, and still am, favoring the shorter maturities.
Kevin
In a previous thread I mentioned that I don't consider reinvestment risk as a negative in my decision making since it can go either way, win or lose.
That is postulated on my belief that I can't second-guess what things will look like in the future.

However, if you believe that inflation will be back down to about 2% in a few years and will stay low (and I assume interest rates as well if you are correct), given that TIPS yields were much lower (mostly negative) when inflation was under control in recent years than now, wouldn't that make you think about spreading your TIPS out over longer maturities as well? This could be a relatively unique buying opportunity with YTMs around 1.5%. When your bonds mature in 2024 or 2025 you may not have the ability to reinvest at real YTMs as high as they are now.

Or am I missing something? I have a feeling I might be. Maybe I am generalizing about the effect of inflation rate on TIPS yields due to recency bias.

Is it because you think that investing in nominal Treasuries at longer maturities hovering now around 4% YTM will outperform TIPS in the long run (2% inflation plus current TIPS YTMs around 1.5% only equals 3.5% total)? So are you buying much longer term nominal Treasuries?
I'm not adding new cash to anything long term at this point. I understand that I'm taking reinvestment risk in doing so, which is exactly what you're talking about.

One thing I thought about doing is selling my long-term and intermediate-term bond funds in IRAs and buying TIPS of comparable duration. I may do that once I've used up my IRA cash. Like you, I have some CDs maturing over the next few years, and may deploy the cash from the IRA ones into TIPS.

One thing Powell said a couple meetings ago is that they wanted to see positive real yields across the yield curve. We have that now, at least based on TIPS yields. Hopefully that will remain one of their goals.

I must admit I'm tempted by 1.5% real, which you can get out to about 5-year maturity, and then not until about 20-year maturity--I'm not interested in going out that long in my circumstances.

Image

So far, patiently buying more TIPS as yields have been increasing this year has been working:

Image

Will it continue to work? We shall see.

Kevin
If I make a calculation error, #Cruncher probably will let me know.
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BlueEars
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Re: VTAPX holdings vs. my TIPS holdings1

Post by BlueEars »

protagonist wrote: Sat Sep 24, 2022 6:01 pm
Kevin M wrote: Fri Sep 23, 2022 12:00 pm My view is that the Fed will succeed in bringing inflation down to the 2% level over the next few years (I think the market may be coming around to this view), so I have been, and still am, favoring the shorter maturities.
Kevin

In a previous thread I mentioned that I don't consider reinvestment risk as a negative in my decision making since it can go either way, win or lose.
That is postulated on my belief that I can't second-guess what things will look like in the future.

However, if you believe that inflation will be back down to about 2% in a few years and will stay low (and I assume interest rates as well if you are correct), given that TIPS yields were much lower (mostly negative) when inflation was under control in recent years than now, wouldn't that make you think about spreading your TIPS out over longer maturities as well? This could be a relatively unique buying opportunity with YTMs around 1.5%. When your bonds mature in 2024 or 2025 you may not have the ability to reinvest at real YTMs as high as they are now.

Or am I missing something? I have a feeling I might be. Maybe I am generalizing about the effect of inflation rate on TIPS yields due to recency bias.

Is it because you think that investing in nominal Treasuries at longer maturities hovering now around 4% YTM will outperform TIPS in the long run (2% inflation plus current TIPS YTMs around 1.5% only equals 3.5% total)? So are you buying much longer term nominal Treasuries?
What I look for is to get about 1% to 2% above inflation. I'll take the real risk in equities. So yes, I think TIPS are a good deal now and would go out to 5 years to 10 years given our ages. All the TIPS I've purchased recently are the 4/15/27 's. So not too worried about reinvestment. But I would take a middle of the road approach to reinvestment risks so further purchases should be in the other dated maturities. Would not have slivers of too many maturities since I like some simplicity.

Some people may like nominal intermediates because they would capture the capital gains boost should rates decline in a recession. Such positions help to balance the declines in equities in recessions. Since I plan on being 50/50 nominals/inflation_protected I would have a foot in both camps.
protagonist
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Re: VTAPX holdings vs. my TIPS holdings1

Post by protagonist »

BlueEars wrote: Sat Sep 24, 2022 8:53 pm
protagonist wrote: Sat Sep 24, 2022 6:01 pm
Kevin M wrote: Fri Sep 23, 2022 12:00 pm My view is that the Fed will succeed in bringing inflation down to the 2% level over the next few years (I think the market may be coming around to this view), so I have been, and still am, favoring the shorter maturities.
Kevin

In a previous thread I mentioned that I don't consider reinvestment risk as a negative in my decision making since it can go either way, win or lose.
That is postulated on my belief that I can't second-guess what things will look like in the future.

However, if you believe that inflation will be back down to about 2% in a few years and will stay low (and I assume interest rates as well if you are correct), given that TIPS yields were much lower (mostly negative) when inflation was under control in recent years than now, wouldn't that make you think about spreading your TIPS out over longer maturities as well? This could be a relatively unique buying opportunity with YTMs around 1.5%. When your bonds mature in 2024 or 2025 you may not have the ability to reinvest at real YTMs as high as they are now.

Or am I missing something? I have a feeling I might be. Maybe I am generalizing about the effect of inflation rate on TIPS yields due to recency bias.

Is it because you think that investing in nominal Treasuries at longer maturities hovering now around 4% YTM will outperform TIPS in the long run (2% inflation plus current TIPS YTMs around 1.5% only equals 3.5% total)? So are you buying much longer term nominal Treasuries?
What I look for is to get about 1% to 2% above inflation. I'll take the real risk in equities. So yes, I think TIPS are a good deal now and would go out to 5 years to 10 years given our ages. All the TIPS I've purchased recently are the 4/15/27 's. So not too worried about reinvestment. But I would take a middle of the road approach to reinvestment risks so further purchases should be in the other dated maturities. Would not have slivers of too many maturities since I like some simplicity.

Some people may like nominal intermediates because they would capture the capital gains boost should rates decline in a recession. Such positions help to balance the declines in equities in recessions. Since I plan on being 50/50 nominals/inflation_protected I would have a foot in both camps.
My approach is like yours, except I have not purchased any nominals. I see the logic, upside in a recession.... but definite downside in accelerating inflation. I am opting for safety within my fixed income bucket (in real terms)....that bucket reserved for money I don't want to lose to inflation, regardless of what happens in the stock market. We are seeing currently how damaging inflation can be to the stock market.

I've gone out as long (TIPS) as 2027....I did buy 10 2028's in June but sold them for about what I paid, and used the proceeds to buy 1/2023 maturities. Currently most of my fixed income is tied up in CDs yielding 3-4.2%, all maturing in late 2023 (come to think of it, those sort of function as nominal Treasuries), so I can only hope that when they mature yields on TIPS will still be favorable. I might consider going out a little longer than 5 years on TIPS now if I had enough liquid cash to invest, simply because yields are tempting.

I'm not sure how I got into this predicament of having so many of my CDs maturing around the same time, but so be it.
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Re: VTAPX holdings vs. my TIPS holdings1

Post by Kevin M »

protagonist wrote: Sun Sep 25, 2022 10:47 am
BlueEars wrote: Sat Sep 24, 2022 8:53 pm
protagonist wrote: Sat Sep 24, 2022 6:01 pm
Kevin M wrote: Fri Sep 23, 2022 12:00 pm My view is that the Fed will succeed in bringing inflation down to the 2% level over the next few years (I think the market may be coming around to this view), so I have been, and still am, favoring the shorter maturities.
Kevin
In a previous thread I mentioned that I don't consider reinvestment risk as a negative in my decision making since it can go either way, win or lose.
That is postulated on my belief that I can't second-guess what things will look like in the future.

However, if you believe that inflation will be back down to about 2% in a few years and will stay low (and I assume interest rates as well if you are correct), given that TIPS yields were much lower (mostly negative) when inflation was under control in recent years than now, wouldn't that make you think about spreading your TIPS out over longer maturities as well? This could be a relatively unique buying opportunity with YTMs around 1.5%. When your bonds mature in 2024 or 2025 you may not have the ability to reinvest at real YTMs as high as they are now.

Or am I missing something? I have a feeling I might be. Maybe I am generalizing about the effect of inflation rate on TIPS yields due to recency bias.

Is it because you think that investing in nominal Treasuries at longer maturities hovering now around 4% YTM will outperform TIPS in the long run (2% inflation plus current TIPS YTMs around 1.5% only equals 3.5% total)? So are you buying much longer term nominal Treasuries?
What I look for is to get about 1% to 2% above inflation. I'll take the real risk in equities. So yes, I think TIPS are a good deal now and would go out to 5 years to 10 years given our ages. All the TIPS I've purchased recently are the 4/15/27 's. So not too worried about reinvestment. But I would take a middle of the road approach to reinvestment risks so further purchases should be in the other dated maturities. Would not have slivers of too many maturities since I like some simplicity.

Some people may like nominal intermediates because they would capture the capital gains boost should rates decline in a recession. Such positions help to balance the declines in equities in recessions. Since I plan on being 50/50 nominals/inflation_protected I would have a foot in both camps.
My approach is like yours, except I have not purchased any nominals. I see the logic, upside in a recession.... but definite downside in accelerating inflation. I am opting for safety within my fixed income bucket (in real terms)....that bucket reserved for money I don't want to lose to inflation, regardless of what happens in the stock market. We are seeing currently how damaging inflation can be to the stock market.

I've gone out as long (TIPS) as 2027....I did buy 10 2028's in June but sold them for about what I paid, and used the proceeds to buy 1/2023 maturities. Currently most of my fixed income is tied up in CDs yielding 3-4.2%, all maturing in late 2023 (come to think of it, those sort of function as nominal Treasuries), so I can only hope that when they mature yields on TIPS will still be favorable. I might consider going out a little longer than 5 years on TIPS now if I had enough liquid cash to invest, simply because yields are tempting.

I'm not sure how I got into this predicament of having so many of my CDs maturing around the same time, but so be it.
I too have a fair amount in direct CDs maturing over the next 11 months. So far, I'm only buying TIPS in IRAs, so I'm looking only at my IRA CDs for potential deployment to TIPS at maturity. Here is my breakdown of IRA CDs by maturity in months:

Image

The one maturing in about a month is my PSECU IRA CD,which was purchased as a 3-year CD at 3.25% APY in Oct 2019. Many of us got in on those, which in taxable also allowed additional deposits, and I have been adding $10K per month to the taxable one, which also matures next month. Will be initiating the IRA transfer to Fidelity in a few days.

The one maturing in 8 months is at Achieva FCU paying 4.20% APY. The others are at Andrews FCU paying 3.0% APY.

DW has a large IRA CD maturing in a few days, and that IRA transfer to Fidelity already is in progress.

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

Post by starfury »

(If this is the wrong thread to ask this in, please move my post accordingly.)

Ok, I'm obviously totally clueless. Looking into purchasing Treasuries from my 401k's BrokerageLink account, Fidelity seems to be setting the minimum purchase price in the range of $100k-$350k, regardless of issue. That's way more than I'm willing to afford. Am I looking in the wrong place? How are folks placing smaller orders than that?
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Re: Trading Treasuries (nominal and TIPS)

Post by jeffyscott »

^ You may need to click on "depth of book".

If you go to the first post in this discussion, there is a link to: "Narrowing the search at Fidelity", that shows that.
bpg1234
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Re: Trading Treasuries (nominal and TIPS)

Post by bpg1234 »

In looking to buy a nominal treasury in the secondary market at Vanguard that has Accrued Interest, etc. versus buying an initial treasury offering at auction does this become onerous when preparing taxes in TurboTax or is everything just included in the download from them that I can easily import into our tax form?

Thanks in advance,
bpg
protagonist
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Re: VTAPX holdings vs. my TIPS holdings1

Post by protagonist »

Kevin M wrote: Sun Sep 25, 2022 12:10 pm
protagonist wrote: Sun Sep 25, 2022 10:47 am
BlueEars wrote: Sat Sep 24, 2022 8:53 pm
protagonist wrote: Sat Sep 24, 2022 6:01 pm
Kevin M wrote: Fri Sep 23, 2022 12:00 pm My view is that the Fed will succeed in bringing inflation down to the 2% level over the next few years (I think the market may be coming around to this view), so I have been, and still am, favoring the shorter maturities.
Kevin
In a previous thread I mentioned that I don't consider reinvestment risk as a negative in my decision making since it can go either way, win or lose.
That is postulated on my belief that I can't second-guess what things will look like in the future.

However, if you believe that inflation will be back down to about 2% in a few years and will stay low (and I assume interest rates as well if you are correct), given that TIPS yields were much lower (mostly negative) when inflation was under control in recent years than now, wouldn't that make you think about spreading your TIPS out over longer maturities as well? This could be a relatively unique buying opportunity with YTMs around 1.5%. When your bonds mature in 2024 or 2025 you may not have the ability to reinvest at real YTMs as high as they are now.

Or am I missing something? I have a feeling I might be. Maybe I am generalizing about the effect of inflation rate on TIPS yields due to recency bias.

Is it because you think that investing in nominal Treasuries at longer maturities hovering now around 4% YTM will outperform TIPS in the long run (2% inflation plus current TIPS YTMs around 1.5% only equals 3.5% total)? So are you buying much longer term nominal Treasuries?
What I look for is to get about 1% to 2% above inflation. I'll take the real risk in equities. So yes, I think TIPS are a good deal now and would go out to 5 years to 10 years given our ages. All the TIPS I've purchased recently are the 4/15/27 's. So not too worried about reinvestment. But I would take a middle of the road approach to reinvestment risks so further purchases should be in the other dated maturities. Would not have slivers of too many maturities since I like some simplicity.

Some people may like nominal intermediates because they would capture the capital gains boost should rates decline in a recession. Such positions help to balance the declines in equities in recessions. Since I plan on being 50/50 nominals/inflation_protected I would have a foot in both camps.
My approach is like yours, except I have not purchased any nominals. I see the logic, upside in a recession.... but definite downside in accelerating inflation. I am opting for safety within my fixed income bucket (in real terms)....that bucket reserved for money I don't want to lose to inflation, regardless of what happens in the stock market. We are seeing currently how damaging inflation can be to the stock market.

I've gone out as long (TIPS) as 2027....I did buy 10 2028's in June but sold them for about what I paid, and used the proceeds to buy 1/2023 maturities. Currently most of my fixed income is tied up in CDs yielding 3-4.2%, all maturing in late 2023 (come to think of it, those sort of function as nominal Treasuries), so I can only hope that when they mature yields on TIPS will still be favorable. I might consider going out a little longer than 5 years on TIPS now if I had enough liquid cash to invest, simply because yields are tempting.

I'm not sure how I got into this predicament of having so many of my CDs maturing around the same time, but so be it.
I too have a fair amount in direct CDs maturing over the next 11 months. So far, I'm only buying TIPS in IRAs, so I'm looking only at my IRA CDs for potential deployment to TIPS at maturity. Here is my breakdown of IRA CDs by maturity in months:

Image

The one maturing in about a month is my PSECU IRA CD,which was purchased as a 3-year CD at 3.25% APY in Oct 2019. Many of us got in on those, which in taxable also allowed additional deposits, and I have been adding $10K per month to the taxable one, which also matures next month. Will be initiating the IRA transfer to Fidelity in a few days.

The one maturing in 8 months is at Achieva FCU paying 4.20% APY. The others are at Andrews FCU paying 3.0% APY.

DW has a large IRA CD maturing in a few days, and that IRA transfer to Fidelity already is in progress.

Kevin
Interesting...I have a bunch at Achieva (4.2%) and Andrews (3%) as well...we probably bought at the same time and likely discussed it. I also have Appalachian Community FCU (3.3%) and Sharonview FCU (4%). All of them are maturing between May and December 2023. If TIPS rates are still favorable I will probably move them all into TIPS and have no more CDs.

Until then, I suppose they are sort of functioning like 8 month-15 month Treasuries....deflation hedge.
bog007
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Re: Trading Treasuries (nominal and TIPS)

Post by bog007 »

what does long first coupon mean? is that better than not having long first coupon. its top ytm at etrade


United States Treas Nts
Long First Coupon | Semi-Annual Pay |
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ku96
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Re: Trading Treasuries (nominal and TIPS)

Post by ku96 »

I just bought a two year T bill at $99.92. I thought rates were over 4.1 percent? Am I missing something here? My six month T bills were at $98.25.

Did a flight to safety make this a lousy two year investment?
MisterMister
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Re: Trading Treasuries (nominal and TIPS)

Post by MisterMister »

ku96 wrote: Mon Sep 26, 2022 12:46 pm I just bought a two year T bill at $99.92. I thought rates were over 4.1 percent? Am I missing something here? My six month T bills were at $98.25.

Did a flight to safety make this a lousy two year investment?
What you bought is not a zero-coupon t-bill, but probably a treasury note. In other words, it has a coupon payment which increases the yield. Even though you paid more for it than your 6-month bill that does not mean the yield is lower. You need to factor in the coupon payments. If you provide the CUSIP number someone can verify that for you.

EDIT: In all likelihood what you bought was the new 2-year note at auction which has a coupon rate of 4.25%. The yield on this note is 4.290%. If you have a spreadsheet program and are familiar with it the following formula shows the yield:

=YIELD("9/30/2022","9/30/2024",4.25%,99.924,100,2,1)
Last edited by MisterMister on Mon Sep 26, 2022 1:53 pm, edited 2 times in total.
Angst
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Re: Trading Treasuries (nominal and TIPS)

Post by Angst »

MisterMister wrote: Mon Sep 26, 2022 1:02 pm
ku96 wrote: Mon Sep 26, 2022 12:46 pm I just bought a two year T bill at $99.92. I thought rates were over 4.1 percent? Am I missing something here? My six month T bills were at $98.25.

Did a flight to safety make this a lousy two year investment?
What you bought is not a zero-coupon t-bill, but probably a treasury note. In other words, it has a coupon payment which increases the yield. If you provide the CUSIP number someone can verify that for you.
I bought the two year "Treasury Note" today too, and I'm pleased. 4-1/4% coupon, 4.290% yield:
https://treasurydirect.gov/instit/annce ... 0926_3.pdf

MisterMister - Note this next link as well. Anytime you're considering buying Treasuries at auction it's a great place for information:
https://treasurydirect.gov/instit/annceresult/press/press_auctionresults.htm
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Chip Munk
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Re: Trading Treasuries (nominal and TIPS)

Post by Chip Munk »

Angst wrote: Mon Sep 26, 2022 1:05 pm
MisterMister wrote: Mon Sep 26, 2022 1:02 pm
ku96 wrote: Mon Sep 26, 2022 12:46 pm I just bought a two year T bill at $99.92. I thought rates were over 4.1 percent? Am I missing something here? My six month T bills were at $98.25.

Did a flight to safety make this a lousy two year investment?
What you bought is not a zero-coupon t-bill, but probably a treasury note. In other words, it has a coupon payment which increases the yield. If you provide the CUSIP number someone can verify that for you.
I bought the two year "Treasury Note" today too, and I'm pleased. 4-1/4% coupon, 4.290% yield:
https://treasurydirect.gov/instit/annce ... 0926_3.pdf

MisterMister - Note this next link as well. Anytime you're considering buying Treasuries at auction it's a great place for information:
https://treasurydirect.gov/instit/annceresult/press/press_auctionresults.htm
Just to add for those new to coupon payments, the interest is paid semi-annually. For this particular 2-year note, the payment dates are Mar 31st and Sep 30th, so the first interest payment should be on Mar 31, 2023.
bpg1234
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Re: Trading Treasuries (nominal and TIPS)

Post by bpg1234 »

bpg1234 wrote: Mon Sep 26, 2022 10:14 am In looking to buy a nominal treasury in the secondary market at Vanguard that has Accrued Interest, etc. versus buying an initial treasury offering at auction does this become onerous when preparing taxes in TurboTax or is everything just included in the download from them that I can easily import into our tax form?

Thanks in advance,
bpg
Kevin,

I believe you have in-depth knowledge of the tax implications of secondary market treasury purchases based on other posts I've seen so perhaps you can apprise on this?

Thanks,
bpg
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Kevin M
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

bpg1234 wrote: Mon Sep 26, 2022 2:54 pm
bpg1234 wrote: Mon Sep 26, 2022 10:14 am In looking to buy a nominal treasury in the secondary market at Vanguard that has Accrued Interest, etc. versus buying an initial treasury offering at auction does this become onerous when preparing taxes in TurboTax or is everything just included in the download from them that I can easily import into our tax form?

Thanks in advance,
bpg
Kevin,

I believe you have in-depth knowledge of the tax implications of secondary market treasury purchases based on other posts I've seen so perhaps you can apprise on this?

Thanks,
bpg
Everything you need should be reported on your 1099-INT and supplemental tax info. As I recall, Vanguard reports the accrued interest in supplemental info on purchases in the year purchased, not necessarily in the year of your first interest payment. If the latter is in a year later than the former, you may need to keep track of the accrued interest from the previous year, and report it in the year you receive your first interest payment.

One year I had a CPA do my taxes, and he subtracted all accrued interest for the tax year in which Vanguard reported it, but that CPA made tons of mistakes on my return, so I think this may not be the correct way to do it. However, it was not audited or corrected by the IRS.

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

Post by cas »

Kevin M wrote: Mon Sep 26, 2022 3:44 pm
bpg1234 wrote: Mon Sep 26, 2022 10:14 am In looking to buy a nominal treasury in the secondary market at Vanguard that has Accrued Interest, etc. versus buying an initial treasury offering at auction does this become onerous when preparing taxes in TurboTax or is everything just included in the download from them that I can easily import into our tax form?
]
Everything you need should be reported on your 1099-INT and supplemental tax info. As I recall, Vanguard reports the accrued interest in supplemental info on purchases in the year purchased, not necessarily in the year of your first interest payment. If the latter is in a year later than the former, you may need to keep track of the accrued interest from the previous year, and report it in the year you receive your first interest payment.
bpg: accrued interest paid to seller is the one item (related to secondary treasuries) I've found that does *not* import into Turbotax. And, as Kevin explained, it will be in the supplemental pages of the Consolidated 1099 package that Vanguard sends you, but not necessarily in the same year that you need to report it.

I recommnend reading this Boglehead's thread: Reporting Accrued Bond Interest Paid . Boglehead's poster MarkNYC (a CPA) chimes in.

You'll need to do a manual adjustment on the 1099-INT form in Turbotax. This isn't hard ... something like you click the check box "I need to make a manual adjustment to this form" and then click the box for accrued interest and enter the number. The hard part is remembering to do it, especially if you don't get any interest for that bond until the year after the year you bought it. I print out the transaction receipt showing the accrued interest paid to seller, circle it, write myself a note, and stick it in my tax folder for the correct year.
bpg1234
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Re: Trading Treasuries (nominal and TIPS)

Post by bpg1234 »

Kevin M wrote: Mon Sep 26, 2022 3:44 pm
Everything you need should be reported on your 1099-INT and supplemental tax info. As I recall, Vanguard reports the accrued interest in supplemental info on purchases in the year purchased, not necessarily in the year of your first interest payment. If the latter is in a year later than the former, you may need to keep track of the accrued interest from the previous year, and report it in the year you receive your first interest payment.

One year I had a CPA do my taxes, and he subtracted all accrued interest for the tax year in which Vanguard reported it, but that CPA made tons of mistakes on my return, so I think this may not be the correct way to do it. However, it was not audited or corrected by the IRS.

Kevin
Thanks Kevin, so if I do buy a secondary treasury that doesn't have any Accrued Interest there is nothing to do or be concerned with for this?
bpg
bpg1234
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Re: Trading Treasuries (nominal and TIPS)

Post by bpg1234 »

cas wrote: Mon Sep 26, 2022 3:59 pm
Kevin M wrote: Mon Sep 26, 2022 3:44 pm
bpg1234 wrote: Mon Sep 26, 2022 10:14 am In looking to buy a nominal treasury in the secondary market at Vanguard that has Accrued Interest, etc. versus buying an initial treasury offering at auction does this become onerous when preparing taxes in TurboTax or is everything just included in the download from them that I can easily import into our tax form?
]
Everything you need should be reported on your 1099-INT and supplemental tax info. As I recall, Vanguard reports the accrued interest in supplemental info on purchases in the year purchased, not necessarily in the year of your first interest payment. If the latter is in a year later than the former, you may need to keep track of the accrued interest from the previous year, and report it in the year you receive your first interest payment.
bpg: accrued interest paid to seller is the one item (related to secondary treasuries) I've found that does *not* import into Turbotax. And, as Kevin explained, it will be in the supplemental pages of the Consolidated 1099 package that Vanguard sends you, but not necessarily in the same year that you need to report it.

I recommnend reading this Boglehead's thread: Reporting Accrued Bond Interest Paid . Boglehead's poster MarkNYC (a CPA) chimes in.

You'll need to do a manual adjustment on the 1099-INT form in Turbotax. This isn't hard ... something like you click the check box "I need to make a manual adjustment to this form" and then click the box for accrued interest and enter the number. The hard part is remembering to do it, especially if you don't get any interest for that bond until the year after the year you bought it. I print out the transaction receipt showing the accrued interest paid to seller, circle it, write myself a note, and stick it in my tax folder for the correct year.
Thanks cas for your response as well. I think I understand based upon your info as I have had to make some manual changes in Turbotax for other items in past years. See my prior response to Kevin as well questioning if this is not an issue or concern if I were to purchase a secondary market treasury that doesn't have any accrued interest.
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

bpg1234 wrote: Mon Sep 26, 2022 5:10 pm
Kevin M wrote: Mon Sep 26, 2022 3:44 pm
Everything you need should be reported on your 1099-INT and supplemental tax info. As I recall, Vanguard reports the accrued interest in supplemental info on purchases in the year purchased, not necessarily in the year of your first interest payment. If the latter is in a year later than the former, you may need to keep track of the accrued interest from the previous year, and report it in the year you receive your first interest payment.

One year I had a CPA do my taxes, and he subtracted all accrued interest for the tax year in which Vanguard reported it, but that CPA made tons of mistakes on my return, so I think this may not be the correct way to do it. However, it was not audited or corrected by the IRS.

Kevin
Thanks Kevin, so if I do buy a secondary treasury that doesn't have any Accrued Interest there is nothing to do or be concerned with for this?
bpg
Correct. T bills, for example, pay no interest, so will not have any accrued interest to report.
If I make a calculation error, #Cruncher probably will let me know.
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Re: Trading Treasuries (nominal and TIPS)

Post by nonnie »

As a novice Treasury buyer several months ago I purchased with maturity dates of 3 months (first maturity Dec) to 18 months and one at 2 years. I knew rates were going up and I should have stayed way shorter or waited to invest but...

I'm wondering if there's any *easy* formula to estimate when selling at a loss and re-investing would make sense. What I would do to start is take my purchase price plus interest rec'd to date (minus accrued interest paid at purchase) and subtract a current quoted price to find my loss--actually now that I think about it, I think I can get that right from my Fidelity account page, just need to be sure about the interest.

I'm not quite sure where to go from there to figure how long a term, what price, YTM, etc. to see if it makes sense. to sell.

Any and all suggestions, formulas, etc. would be welcome.

Thanks,
Nonnie
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Re: Trading Treasuries (nominal and TIPS)

Post by vineviz »

nonnie wrote: Mon Sep 26, 2022 6:39 pm As a novice Treasury buyer several months ago I purchased with maturity dates of 3 months (first maturity Dec) to 18 months and one at 2 years. I knew rates were going up and I should have stayed way shorter or waited to invest but...
You couldn't have known that. Don't beat yourself up or give yourself credit for have a prescience that no one has.


nonnie wrote: Mon Sep 26, 2022 6:39 pm I'm wondering if there's any *easy* formula to estimate when selling at a loss and re-investing would make sense.
The only formula is that it almost never makes sense to do this.

Sure, your Treasuries have dropped in price. But from here, where they stand today, the bonds you own have much higher yields than they did when you bought them.

Selling one Treasury with a good yield and buying another with the same yield would accomplish nothing except generate profits for your broker and - in a taxable account - a short-term capital loss to report on your taxes.
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Re: Trading Treasuries (nominal and TIPS)

Post by Doc »

From memory (and I am not going to check),

I believe that if you are using Quicken to record your financial data that there is an "accrued interest" entry available on the buy bonds transaction. Problem solved.

Quicken tax data is consistent with 1099s.

Since I download 1099's directly to TurboTax from the brokers it matters not.
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Re: Trading Treasuries (nominal and TIPS)

Post by nonnie »

vineviz wrote: Mon Sep 26, 2022 6:50 pm
nonnie wrote: Mon Sep 26, 2022 6:39 pm As a novice Treasury buyer several months ago I purchased with maturity dates of 3 months (first maturity Dec) to 18 months and one at 2 years. I knew rates were going up and I should have stayed way shorter or waited to invest but...
You couldn't have known that. Don't beat yourself up or give yourself credit for have a prescience that no one has.


nonnie wrote: Mon Sep 26, 2022 6:39 pm I'm wondering if there's any *easy* formula to estimate when selling at a loss and re-investing would make sense.
The only formula is that it almost never makes sense to do this.

Sure, your Treasuries have dropped in price. But from here, where they stand today, the bonds you own have much higher yields than they did when you bought them.

Selling one Treasury with a good yield and buying another with the same yield would accomplish nothing except generate profits for your broker and - in a taxable account - a short-term capital loss to report on your taxes.
Thanks for your response but I'm not sure I understand--perhaps I was unclear? Yes, they have higher yields today but if I hold them to maturity, I will get the original YTM. If I have a Treasury earning 2.8 to 3.2% with maturities from 3-18 mos and currently secondary market issues are now yielding 3.4 to 4.2% why wouldn't I want to do this comparison? That's what I'm asking :-)
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Re: Trading Treasuries (nominal and TIPS)

Post by vineviz »

nonnie wrote: Mon Sep 26, 2022 8:38 pm Thanks for your response but I'm not sure I understand--perhaps I was unclear? Yes, they have higher yields today but if I hold them to maturity, I will get the original YTM. If I have a Treasury earning 2.8 to 3.2% with maturities from 3-18 mos and currently secondary market issues are now yielding 3.4 to 4.2% why wouldn't I want to do this comparison? That's what I'm asking :-)
If you see that a 52-week Treasury has a YTM of 4.2% in the secondary market, and you also own a Treasury that matures in 52-weeks then your Treasury also has a YTM of at least 4.2%.

You will get the original YTM from your original purchase date to the maturity. But even securities you own, you will get the current YTM from the current date.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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Re: VTAPX holdings vs. my TIPS holdings1

Post by travlinman561 »

Kevin M wrote: Sun Sep 25, 2022 12:10 pm
The one maturing in about a month is my PSECU IRA CD,which was purchased as a 3-year CD at 3.25% APY in Oct 2019. Many of us got in on those, which in taxable also allowed additional deposits, and I have been adding $10K per month to the taxable one, which also matures next month. Will be initiating the IRA transfer to Fidelity in a few days.
Kevin
I also have a 3 year PSECU IRA CD maturing next month and will also be doing a transfer to Fidelity. What is the best way and timing to initiate the transfer with Fidelity? I was going to wait for the CD to mature and upon maturity have the proceeds transferred to a PSECU IRA savings account; then initiate the Fidelity transfer from the PSECU IRA savings account. Is there a faster and more efficient way to do this transfer?
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Re: VTAPX holdings vs. my TIPS holdings1

Post by MisterMister »

travlinman561 wrote: Tue Sep 27, 2022 7:23 am
Kevin M wrote: Sun Sep 25, 2022 12:10 pm
The one maturing in about a month is my PSECU IRA CD,which was purchased as a 3-year CD at 3.25% APY in Oct 2019. Many of us got in on those, which in taxable also allowed additional deposits, and I have been adding $10K per month to the taxable one, which also matures next month. Will be initiating the IRA transfer to Fidelity in a few days.
Kevin
I also have a 3 year PSECU IRA CD maturing next month and will also be doing a transfer to Fidelity. What is the best way and timing to initiate the transfer with Fidelity? I was going to wait for the CD to mature and upon maturity have the proceeds transferred to a PSECU IRA savings account; then initiate the Fidelity transfer from the PSECU IRA savings account. Is there a faster and more efficient way to do this transfer?
I don’t think so. But if you link your savings account at Fidelity you can initiate the transfer from the Fidelity side. My experience has been that the money can be reinvested the same day the transfer is initiated at Fidelity, even though the actual ACH transfer may take a few days.
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Re: Trading Treasuries (nominal and TIPS)

Post by jeffyscott »

vineviz wrote: Tue Sep 27, 2022 5:57 am
nonnie wrote: Mon Sep 26, 2022 8:38 pm Thanks for your response but I'm not sure I understand--perhaps I was unclear? Yes, they have higher yields today but if I hold them to maturity, I will get the original YTM. If I have a Treasury earning 2.8 to 3.2% with maturities from 3-18 mos and currently secondary market issues are now yielding 3.4 to 4.2% why wouldn't I want to do this comparison? That's what I'm asking :-)
If you see that a 52-week Treasury has a YTM of 4.2% in the secondary market, and you also own a Treasury that matures in 52-weeks then your Treasury also has a YTM of at least 4.2%.

You will get the original YTM from your original purchase date to the maturity. But even securities you own, you will get the current YTM from the current date.
And by trading all you accomplish is losing the bid/ask spread. For example, your ~1 year treasury may sell at a price that would result in a YTM of 4.25% and then when you go to buy something similar, you may be buying at a price that results in a YTM of 4.15%.

Someone could decide that they now want to extend maturity to lock in the current yield for a longer term. So, in that case maybe they'd sell the 1 year at 4.25% and buy a 5-10 year at 4.0-4.1%, or whatever.
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Re: Trading Treasuries (nominal and TIPS)

Post by BlueEars »

I watched a 9 minute video by economist Campbell Harvey here: https://tipswatch.com/2022/09/04/video- ... inflation/

In it he makes the point that the housing component in the CPI has a strong lag effect nowadays. This is predictable and spreads the strong housing inflation we have seen over several months going forward. So the CPI should continue to show inflationary pressures for at least a year out even though the wave has washed ashore.

Doesn't this argue for at least shorter term TIPS? Has the market already priced in this "owners equivalent rent" CPI component effect?
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Re: Trading Treasuries (nominal and TIPS)

Post by billyt »

I would never, ever base an investing decision on anyone's opinion about the future, including my own!
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Re: Trading Treasuries (nominal and TIPS)

Post by Tom_T »

BlueEars wrote: Tue Sep 27, 2022 9:32 am I watched a 9 minute video by economist Campbell Harvey here: https://tipswatch.com/2022/09/04/video- ... inflation/

In it he makes the point that the housing component in the CPI has a strong lag effect nowadays. This is predictable and spreads the strong housing inflation we have seen over several months going forward. So the CPI should continue to show inflationary pressures for at least a year out even though the wave has washed ashore.

Doesn't this argue for at least shorter term TIPS? Has the market already priced in this "owners equivalent rent" CPI component effect?
I would think that the market is well aware of what is going on with mortgage rates and the housing market, regardless of what CPI says, and is going to bid accordingly.
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Re: Trading Treasuries (nominal and TIPS)

Post by jeffyscott »

BlueEars wrote: Tue Sep 27, 2022 9:32 am Has the market already priced in this "owners equivalent rent" CPI component effect?
I'd assume so, why wouldn't it be?

The alternative is to assume that you now know something about how the CPI is calculated that professional bond traders are unaware of.
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Re: Trading Treasuries (nominal and TIPS)

Post by BlueEars »

jeffyscott wrote: Tue Sep 27, 2022 9:49 am
BlueEars wrote: Tue Sep 27, 2022 9:32 am Has the market already priced in this "owners equivalent rent" CPI component effect?
I'd assume so, why wouldn't it be?

The alternative is to assume that you now know something about how the CPI is calculated that professional bond traders are unaware of.
So I guess watching this catches me up with the bond traders? :happy
Makes TIPS more attractive to me. Also since I own a house the headline CPI will be less of a distraction to how I make bond purchase decisions.
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Re: Trading Treasuries (nominal and TIPS)

Post by BlueEars »

billyt wrote: Tue Sep 27, 2022 9:40 am I would never, ever base an investing decision on anyone's opinion about the future, including my own!
The video did not predict future CPI rates so much as make the point that known housing inflation is spread out over many months. This is as opposed to 40 years ago when apparently the calculation of housing inflation was more immediate.
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Re: VTAPX holdings vs. my TIPS holdings1

Post by Kevin M »

travlinman561 wrote: Tue Sep 27, 2022 7:23 am
Kevin M wrote: Sun Sep 25, 2022 12:10 pm
The one maturing in about a month is my PSECU IRA CD,which was purchased as a 3-year CD at 3.25% APY in Oct 2019. Many of us got in on those, which in taxable also allowed additional deposits, and I have been adding $10K per month to the taxable one, which also matures next month. Will be initiating the IRA transfer to Fidelity in a few days.
Kevin
I also have a 3 year PSECU IRA CD maturing next month and will also be doing a transfer to Fidelity. What is the best way and timing to initiate the transfer with Fidelity? I was going to wait for the CD to mature and upon maturity have the proceeds transferred to a PSECU IRA savings account; then initiate the Fidelity transfer from the PSECU IRA savings account. Is there a faster and more efficient way to do this transfer?
I fill out the Fidelity IRA transfer form and mail it about a month ahead of CD maturity. There's an option to transfer proceeds of CD at maturity, which is the one I check. The bank or credit union then should send the check to Fidelity soon after the CD matures.
If I make a calculation error, #Cruncher probably will let me know.
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

nonnie wrote: Mon Sep 26, 2022 6:39 pm As a novice Treasury buyer several months ago I purchased with maturity dates of 3 months (first maturity Dec) to 18 months and one at 2 years. I knew rates were going up and I should have stayed way shorter or waited to invest but...

I'm wondering if there's any *easy* formula to estimate when selling at a loss and re-investing would make sense. What I would do to start is take my purchase price plus interest rec'd to date (minus accrued interest paid at purchase) and subtract a current quoted price to find my loss--actually now that I think about it, I think I can get that right from my Fidelity account page, just need to be sure about the interest.

I'm not quite sure where to go from there to figure how long a term, what price, YTM, etc. to see if it makes sense. to sell.

Any and all suggestions, formulas, etc. would be welcome.

Thanks,
Nonnie
As others have said, it makes no sense to sell a Treasury and buy the same maturity, since you will incur a small trading cost. The bid/ask spread can be tiny, like 1 basis point (0.01%) or less, but it can be a bit higher as well. The average price bid/ask is about 5 basis points for maturities out to two years. But, that's based on the best prices, and you probably will get a slightly lower price if you sell a smaller quantity, and pay a slightly higher price if buying a smaller quantity.

Unlike others have said, I think we had high confidence that short term yields would rise, especially 1-month to 3-month, since they anticipate and respond to Fed rate hikes, which we knew with high probability were coming. The impact on longer maturities is much less certain.

I have sold Treasuries in the past when there were better opportunities, like a super-good CD deal. Other than that, I hold to maturity.

With a simple spreadsheet setup, you can calculate the internal rate of return you have earned on any date. But, I base my investment decisions on expected return, not past return.

Kevin
If I make a calculation error, #Cruncher probably will let me know.
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Re: VTAPX holdings vs. my TIPS holdings1

Post by Kevin M »

MisterMister wrote: Tue Sep 27, 2022 7:50 am
travlinman561 wrote: Tue Sep 27, 2022 7:23 am
Kevin M wrote: Sun Sep 25, 2022 12:10 pm
The one maturing in about a month is my PSECU IRA CD,which was purchased as a 3-year CD at 3.25% APY in Oct 2019. Many of us got in on those, which in taxable also allowed additional deposits, and I have been adding $10K per month to the taxable one, which also matures next month. Will be initiating the IRA transfer to Fidelity in a few days.
Kevin
I also have a 3 year PSECU IRA CD maturing next month and will also be doing a transfer to Fidelity. What is the best way and timing to initiate the transfer with Fidelity? I was going to wait for the CD to mature and upon maturity have the proceeds transferred to a PSECU IRA savings account; then initiate the Fidelity transfer from the PSECU IRA savings account. Is there a faster and more efficient way to do this transfer?
I don’t think so. But if you link your savings account at Fidelity you can initiate the transfer from the Fidelity side. My experience has been that the money can be reinvested the same day the transfer is initiated at Fidelity, even though the actual ACH transfer may take a few days.
Fine for taxable, but you can't do this for an IRA transfer. You must submit the form to Fidelity, and they'll handle it from there.

If you send the form in advance as I do, you could get the proceeds in a few days after maturity. It depends how fast the CU or bank does their part of it.
If I make a calculation error, #Cruncher probably will let me know.
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Re: Trading Treasuries (nominal and TIPS)

Post by hoops777 »

vineviz wrote: Tue Sep 27, 2022 5:57 am
nonnie wrote: Mon Sep 26, 2022 8:38 pm Thanks for your response but I'm not sure I understand--perhaps I was unclear? Yes, they have higher yields today but if I hold them to maturity, I will get the original YTM. If I have a Treasury earning 2.8 to 3.2% with maturities from 3-18 mos and currently secondary market issues are now yielding 3.4 to 4.2% why wouldn't I want to do this comparison? That's what I'm asking :-)
If you see that a 52-week Treasury has a YTM of 4.2% in the secondary market, and you also own a Treasury that matures in 52-weeks then your Treasury also has a YTM of at least 4.2%.

You will get the original YTM from your original purchase date to the maturity. But even securities you own, you will get the current YTM from the current date.
I was thinking the same thing until I quickly figured out that all the one year treasuries I bought at 3 pct which seemed like a great deal at the time, are now yielding about the same as buying the current offerings, so it would be foolish to sell. Wish I would have kept some dry powder but it is what it is.
A lot better than seeing some stock be down 35%.
K.I.S.S........so easy to say so difficult to do.
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Re: VTAPX holdings vs. my TIPS holdings

Post by Kevin M »

Kevin M wrote: Fri Sep 23, 2022 12:00 pm I used the Vanguard institutional site to download the holdings of Vanguard's short-term TIPS fund, VTAPX. I thought it would be interesting to compare my holdings to the fund's holdings.

Here are VTAPX holdings as of 8/31/22:

Image

The fund holds every maturity from 1/15/22 to 7/15/27. The largest holding is the shortest-term TIPS, the Jan 2023. Holdings generally decrease as maturity increases. Except for 2027, they hold less Apr than Jan or Jul in each maturity year. Since this is an index fund, I assume the holdings are related to the amount outstanding for each maturity. Anyone want to check that?

Here are my holdings, shown in the same way (this does not include DW's holdings):

Image

Obviously I hold much more in the shorter maturities. I find it interesting that the patterns of Jan, Apr and Jul 2023 are similar, which is completely coincidental.

My policy for buying TIPS has been evolving. My view is that the Fed will succeed in bringing inflation down to the 2% level over the next few years (I think the market may be coming around to this view), so I have been, and still am, favoring the shorter maturities. I think what I'll be focusing on now is adding to the 2024 maturities to bring them more in line to the Vanguard % holdings (relative to my 2023 holdings), so I need to start by adding more Jan 2024 (bought some yesterday).

I haven't looked at TIPS yields today, but I see that short-term TIPS ETFs are down today, so short-term TIPS yields should be up.

Kevin
Bought more of the Jan 2024. My holdings now look like this:

Image

Latest purchase was yesterday at 2.34% (SA 2.00%). Large quantity yield on the Jan 2024 was 2.43% (SA 2.10%) when I checked earlier. Now I see 2.414 for min 100, and 2.398 for min 1, so a large/small-qty spread of less than 1 basis point.

I tried to buy some of the 7/15/24 for DW at Vanguard yesterday. First, min qty 1 yield was something like 30 bps below large-qty yield, which is ridiculous (that's why I like to check). Next, there were no offers of less than min qty 100.

So, I bought her 10 of the 4/15/24 at 2.22% (SA 1.85%) instead (following my own advice to select an adjacent maturity if can't get the one you want).

Currently I see min qty 1 for the 7/15/24 at Fidelity at 1.990 and min qty 100 at 2.015. At Vanguard I see about the same. So could not get 10 of it yesterday, but could today.

Her TIPS holdings look like this now:

Image

Kevin
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Re: Trading Treasuries (nominal and TIPS)

Post by nonnie »

hoops777 wrote: Tue Sep 27, 2022 12:53 pm
vineviz wrote: Tue Sep 27, 2022 5:57 am
nonnie wrote: Mon Sep 26, 2022 8:38 pm Thanks for your response but I'm not sure I understand--perhaps I was unclear? Yes, they have higher yields today but if I hold them to maturity, I will get the original YTM. If I have a Treasury earning 2.8 to 3.2% with maturities from 3-18 mos and currently secondary market issues are now yielding 3.4 to 4.2% why wouldn't I want to do this comparison? That's what I'm asking :-)
If you see that a 52-week Treasury has a YTM of 4.2% in the secondary market, and you also own a Treasury that matures in 52-weeks then your Treasury also has a YTM of at least 4.2%.

You will get the original YTM from your original purchase date to the maturity. But even securities you own, you will get the current YTM from the current date.
I was thinking the same thing until I quickly figured out that all the one year treasuries I bought at 3 pct which seemed like a great deal at the time, are now yielding about the same as buying the current offerings, so it would be foolish to sell. Wish I would have kept some dry powder but it is what it is.
A lot better than seeing some stock be down 35%.
There's something I don't understand and I'm not sure what. I haven't been talking about selling and re-purchasing the same issue but selling, taking my loss and buying another higher YTM.
When I purchased the Treasury below, the YTM was 3.285. If I sell today --$100,000, I will have a loss of $1898. If I hold to maturity, I will receive $100K that with coupon interest works out to the 3.285 YTM, correct? What difference does it make what the YTM is today if I'm going to hold to maturity-- this is what I don't understand. I do understand that I'd have to get a pretty high YTM on a new purchase to make up the $1898 loss.

Please point out the mistakes in my thinking since I really need to understand. Thanks, much.

9128282U3 UNITED STATES TREAS SER P-2024 1.87500% 08/31/2024 NTS NOTE Bid Price 95.472000
Bid Yield 4.355000--
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

nonnie wrote: Tue Sep 27, 2022 4:24 pm There's something I don't understand and I'm not sure what. I haven't been talking about selling and re-purchasing the same issue but selling, taking my loss and buying another higher YTM.
When I purchased the Treasury below, the YTM was 3.285. If I sell today --$100,000, I will have a loss of $1898. If I hold to maturity, I will receive $100K that with coupon interest works out to the 3.285 YTM, correct? What difference does it make what the YTM is today if I'm going to hold to maturity-- this is what I don't understand. I do understand that I'd have to get a pretty high YTM on a new purchase to make up the $1898 loss.

Please point out the mistakes in my thinking since I really need to understand. Thanks, much.

9128282U3 UNITED STATES TREAS SER P-2024 1.87500% 08/31/2024 NTS NOTE Bid Price 95.472000
Bid Yield 4.355000--
I don't know that we can explain it any better than what has already been said.

The yield on the bond you own now is whatever it is on the secondary market today, not when you bought it, so say 4.3% or so. So, you will earn that yield on the bond you own now from now until maturity, just like you would if you bought another one today (regardless of whether you sell your or not), although you would get the lower ask yield (higher ask price).

Yes, if you hold to maturity, your internal rate of return from settlement to maturity will be your original yield. But, you can't go back in time and buy that bond then at today's yield.

Unless you are talking about changing maturity, yes, you are basically talking about selling and buying back the same bond, or another one with a similar yield as the bond you own now. This is a guaranteed money loser.

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 jeffyscott »

nonnie wrote: Tue Sep 27, 2022 4:24 pm When I purchased the Treasury below, the YTM was 3.285. If I sell today --$100,000, I will have a loss of $1898. If I hold to maturity, I will receive $100K that with coupon interest works out to the 3.285 YTM, correct?

9128282U3 UNITED STATES TREAS SER P-2024 1.87500% 08/31/2024 NTS NOTE Bid Price 95.472000
Bid Yield 4.355000--
Think about if you did sell and buy the very same bond. You would then own a bond with a YTM of about 4.3%, right?

Assuming you agree with that, it should answer this:
What difference does it make what the YTM is today

I do understand that I'd have to get a pretty high YTM on a new purchase to make up the $1898 loss.
Specifically, you'd need a YTM of about 4.35% to make up the $1898 in the time remaining to maturity of your current bond. (Could be some variation due to coupon differences, but it will be close to 4.35%, since that's YTM that you would be selling.)
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Re: Trading Treasuries (nominal and TIPS)

Post by blueoval9942 »

Another Treasury note newbie here, made a few recent buys on Vanguard secondary.

Question is regarding coupon payment: how are these received in my VG IRA brokerage account? Would i see a deposit to the settlement fund, or??

Appreciate the help.
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Re: Trading Treasuries (nominal and TIPS)

Post by jeffyscott »

^ Yes, coupon payments will go to the settlement account.
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Re: Trading Treasuries (nominal and TIPS)

Post by bog007 »

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evelynmanley
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Re: Trading Treasuries (nominal and TIPS)

Post by evelynmanley »

bog007 wrote: Wed Sep 28, 2022 1:45 am Good lil vid on buying treasuries

https://www.youtube.com/watch?v=rFuiC-U ... ondNestEgg
Thanks for sharing this video. It's great!
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Kevin M
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

bog007 wrote: Wed Sep 28, 2022 1:45 am Good lil vid on buying treasuries

https://www.youtube.com/watch?v=rFuiC-U ... ondNestEgg
This covers only buying at auction. Lots of info on benefits of Treasuries, so not a bad primer.
If I make a calculation error, #Cruncher probably will let me know.
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Kevin M
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

I may be recalling incorrectly, but I recall seeing folks saying they couldn't buy Treasuries at Vanguard with cash newly transferred in from a bank account. Just wanted to share that I just bought 50 9/30/23 nominal Treasuries (yield = 4.205%) and 40 7/15/23 TIPS (yield = 2.152%) for a friend with cash he transferred in today (I am an agent). He does not have margin.
If I make a calculation error, #Cruncher probably will let me know.
travlinman561
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Re: Trading Treasuries (nominal and TIPS)

Post by travlinman561 »

I have a lot of money in 5 year credit union IRA CDs that mature in 2024, as well as money in an IRA brokerage account. I feel that 5 year treasury yields will probably peak sometime in 2023 (I know this is market timing) before my IRA CDs mature. When I feel that 5 year treasury yields have peaked, would it make sense to buy 5 year treasury futures in my IRA brokerage account (in order to lock in the "peak" 5 year treasury rate) and roll them until my IRA CDs mature in 2024; then use the proceeds from the maturing IRA CDs to buy real 5 year treasury notes at whatever the prevailing interest rate is at that time? Any gain (loss) on the treasury futures should be offset by the decrease (increase) in interest that would be earned on the real 5 year treasury notes during their lifetime. I am looking at this as an alternative to doing an early withdrawal on the CDs and incurring an early withdrawal penalty.
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Blues
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Re: Trading Treasuries (nominal and TIPS)

Post by Blues »

Kevin M wrote: Wed Sep 28, 2022 1:02 pm I may be recalling incorrectly, but I recall seeing folks saying they couldn't buy Treasuries at Vanguard with cash newly transferred in from a bank account. Just wanted to share that I just bought 50 9/30/23 nominal Treasuries (yield = 4.205%) and 40 7/15/23 TIPS (yield = 2.152%) for a friend with cash he transferred in today (I am an agent). He does not have margin.
I have made several purchases of Treasuries with incoming transfers from Ally that Vanguard hadn't yet received but credited me with for the purposes of buying.
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Kevin M
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Re: VTAPX holdings vs. my TIPS holdings

Post by Kevin M »

Kevin M wrote: Tue Sep 27, 2022 3:07 pm Bought more of the Jan 2024. <snip>

Latest purchase was yesterday at 2.34% (SA 2.00%). Large quantity yield on the Jan 2024 was 2.43% (SA 2.10%) when I checked earlier. Now I see 2.414 for min 100, and 2.398 for min 1, so a large/small-qty spread of less than 1 basis point.
High ask yield on Jan 2024 now is 2.09% (SA 1.75%), and yield for min qty 1 is 2.07%. I recall that the yield was up about 10 basis points yesterday, so a drop of over 30 basis points since yesterday.

<snip>
Kevin M wrote: Tue Sep 27, 2022 3:07 pm So, I bought her 10 of the 4/15/24 at 2.22% (SA 1.85%) instead (following my own advice to select an adjacent maturity if can't get the one you want).
High yield now 1.97% (SA 1.60%), and for min qty 1 it's 1.95%.
Kevin M wrote: Tue Sep 27, 2022 3:07 pm Currently I see min qty 1 for the 7/15/24 at Fidelity at 1.990 and min qty 100 at 2.015. At Vanguard I see about the same. So could not get 10 of it yesterday, but could today.
High yield was 1.67% (SA 1.60%) when I pulled quotes a few minutes ago, now is 1.659, and for min qty 1 it's 1.634.

So, significant yield drops for shorter-term TIPS today.

Image

Kevin
If I make a calculation error, #Cruncher probably will let me know.
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