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by BlueEars
Wed Dec 07, 2022 9:56 am
Forum: Investing - Theory, News & General
Topic: What's wrong with not staying the course - and buying bonds now?
Replies: 72
Views: 11729

Re: What's wrong with not staying the course - and buying bonds now?

hudson wrote: Wed Dec 07, 2022 9:47 am ...
Next year at age 76, I plan to be 50/50 to 70/30 TIPS/Nominal. Today, I'm 10/90 TIPS/nominal.
These discussions help me figure out where I want to go.
FWIW, I am 74 and have 67/33 TIPS+iBonds/cash. Planning on replacing the cash (very short term Treasuries) with longer dated nominals.
by BlueEars
Wed Dec 07, 2022 9:21 am
Forum: Investing - Theory, News & General
Topic: What's wrong with not staying the course - and buying bonds now?
Replies: 72
Views: 11729

Re: What's wrong with not staying the course - and buying bonds now?

I too am thinking that rates are reasonable here and we have come to the end of the more extreme rate hikes i.e. the slope vs time is flattening. So although we may not be at the max rate (thinking the 5yr Treasuries here) we are close enough to be actionable.

So I'm thinking about buying into VFIUX (intermediate Treasuries) with as much as 25% of my FI allocation. I had sold all my nominal bonds in early January 2022. I've since bought TIPS to cover future RMD's and own a good chunk of 3.4% iBonds.
by BlueEars
Wed Nov 30, 2022 3:28 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: Trading Treasuries (nominal and TIPS)

Thanks Kevin, I am planning on keeping 1/2 of the TIPS to maturity because they take care of RMD's in 2023. The rest I am inclined to extend out now to 2028.

Fortunately for my stocks but unfortunate for my extending the 5yr TIPS idea, I see that today Powell confirmed the market expectations of smaller rate hikes in December. Looking at Bloomberg the 5yr TIPS took a dive after that talk. Down from about 1.59% to 1.33%. Timing is treacherous. :?
by BlueEars
Wed Nov 30, 2022 11:30 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: Trading Treasuries (nominal and TIPS)

I have a low 6 figure amount in TIPS maturing in April 2023 and purchased in 2018. I am debating exchanging them now for TIPS maturing (about 5 years from now) in April 2028. The current TIPS rate is about 1.68% for April 2028 which sounds decent and low risk.

It "feels" to me like TIPS rates might go lower by April 2023. So the question is whether to pull the trigger now or wait for maturity in April 2023. Not sure how to estimate the impact of selling now and extending out. The April 2023's are priced at 99.17 now.

Thoughts?
by BlueEars
Thu Oct 27, 2022 10:24 am
Forum: Investing - Theory, News & General
Topic: Are 1-month T-Bills better than VMFXX?
Replies: 10
Views: 2326

Re: Are 1-month T-Bills better than VMFXX?

Chuck wrote: Thu Oct 27, 2022 10:07 am
BlueEars wrote: Thu Oct 27, 2022 9:37 am VMFXX Sec yield is 2.88% which has an expense ratio of 0.11%.
FYI, SEC yield already has the expense subtracted out, so you can generally ignore ER for bond and money market funds.
Thanks for that. The ER does show me explicitly that there is a slight penalty.
by BlueEars
Thu Oct 27, 2022 9:37 am
Forum: Investing - Theory, News & General
Topic: Are 1-month T-Bills better than VMFXX?
Replies: 10
Views: 2326

Re: Are 1-month T-Bills better than VMFXX?

Just so happens I bought short Tbills (expire 12/8) yesterday at 3.45%. VMFXX Sec yield is 2.88% which has an expense ratio of 0.11%. Most of my purchases were in tax deferred accounts. Even if I get a somewhat better return, in the scheme of things it is a very minor victory.

BTW, you can do a bulk purchase and have Vanguard distribute it to various accounts. To do this call the bond desk and they get you to a specialist.
by BlueEars
Sat Oct 08, 2022 5:05 pm
Forum: Investing - Theory, News & General
Topic: Market capitalization of TIPS / Sudden Popularity
Replies: 178
Views: 15809

Re: Market capitalization of TIPS / Sudden Popularity

ScubaHogg wrote: Thu Oct 06, 2022 8:02 am 2. I’d say there are a number of posters, such as the departed Willthrill81 (and me to a modest extent) that have been advocating for TIPS for some time now.
...
Has he really departed? And why?
by BlueEars
Sun Oct 02, 2022 3:56 pm
Forum: Investing - Theory, News & General
Topic: TIPs: The final year in the life of a 5 year TIP
Replies: 125
Views: 14211

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

I seemed to recall seeing the TIPS factor data at Treasury DIrect but so far haven't found it again. You also can get index ratios (aka inflation factors) at this website: http://eyebonds.info/tips/index.html. You can also get the TIPS dated dates from that website, and then calculate the index ratios by dividing settlement ref CPI by dated date ref CPI. Settlement (daily) ref CPIs for October are calculated using linear interpolation between Oct 1 ref CPI (= July CPI = 296.276) and Nov 1 ref CPI (= Aug CPI = 296.171). Kevin Cool. So if I am reading the tables correctly the inflation factor for the 4/15/23 TIPS has flattened out in recent months. That is, the data shows Aug 31 =1.19240 and for Nov 1 =1.19236 as shown on http://eyebonds.inf...
by BlueEars
Sun Oct 02, 2022 12:55 pm
Forum: Investing - Theory, News & General
Topic: TIPS - YTM vs real interest rate
Replies: 7
Views: 770

Re: TIPS - YTM vs real interest rate

grok87 wrote: Sun Oct 02, 2022 12:38 pm hate to be THAT guy, but if you buy tips at par and there is net deflation over the holding period, the actual real yield would end up being higher than the auction real yield to maturity
In modern times has there ever been a period of net deflation over some years? Yes, you can buy very short term TIPS and I'm not referring to that. Most of my TIPS are currently at least a few years out. Well we could have another 1930's scenario but I seriously doubt that governments and central banks would allow that again.

Would be interested on thoughts of such a risk for TIPS.
by BlueEars
Sun Oct 02, 2022 10:56 am
Forum: Investing - Theory, News & General
Topic: TIPs: The final year in the life of a 5 year TIP
Replies: 125
Views: 14211

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

TIPS inflation index ratios are based on the non-seasonally adjusted CPI. You can find the index ratios for any TIPS at Treasury Direct. The index ratios have declined steadily throughout September and will continue to decline for the rest of October. So your TIPS are in deflation mode as we speak. I don't expect inflation to just totally disappear either; but it is important to actually look at the data and admit that one does not know what the future holds. Many people are distracted by the headline year over year number, which changes only gradually and reflects inflation over the last year. OK thanks. Now that I look at the non-seasonally adjusted CPIAUCNS I see small declines in July and August. I seemed to recall seeing the TIPS fact...
by BlueEars
Sun Oct 02, 2022 10:31 am
Forum: Investing - Theory, News & General
Topic: TIPs: The final year in the life of a 5 year TIP
Replies: 125
Views: 14211

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

billyt wrote: Sun Oct 02, 2022 10:18 am We have already had 2 months of slightly declining CPI. The current adjustments to TIPS are negative through the end of October.
Am I looking at the wrong CPI? When I look at the CPIAUCSL data I only see July declining slightly. Here is that data for 2022:
2021-12-01 280.126
2022-01-01 281.933
2022-02-01 284.182
2022-03-01 287.708
2022-04-01 288.663
2022-05-01 291.474
2022-06-01 295.328
2022-07-01 295.271
2022-08-01 295.620
by BlueEars
Sun Oct 02, 2022 9:56 am
Forum: Investing - Theory, News & General
Topic: TIPs: The final year in the life of a 5 year TIP
Replies: 125
Views: 14211

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

Deflation by April? I could believe disinflation but hard to imagine actual net deflation.
by BlueEars
Thu Sep 29, 2022 1:21 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: Trading Treasuries (nominal and TIPS)

Reading this thread (and especially Kevin's bar chart on his purchases) I realized that getting some TIPS to fulfill my RMD's would be a good idea. So I will probably get a set of them going out maybe 5 years. That is in addition to having longer term TIPS.

Mentioning this in case some people in that age group have room in their IRA accounts for TIPS.
by BlueEars
Tue Sep 27, 2022 9:59 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: Trading Treasuries (nominal and TIPS)

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.
by BlueEars
Tue Sep 27, 2022 9:55 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: Trading Treasuries (nominal and TIPS)

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.
by BlueEars
Tue Sep 27, 2022 9:32 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: Trading Treasuries (nominal and TIPS)

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?
by BlueEars
Sat Sep 24, 2022 8:53 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: VTAPX holdings vs. my TIPS holdings1

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...
by BlueEars
Thu Sep 22, 2022 10:11 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: Trading Treasuries (nominal and TIPS)

I see 5 year TIPS at 1.42% now. I have some TIPS maturing on 4/15/23.

My thought is to hold them until April and then maybe extend out to 5 year TIPS. Would have worked nicely in 2005.

Opinions?
by BlueEars
Tue Sep 20, 2022 9:59 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: Trading Treasuries (nominal and TIPS)

I would love to hear an explanation of how SA (seasonally adjusted) inflation affects TIPS yields. So far I have just been buying at any given year the highest available YTM while keeping at a reasonable inflation factor, but I still need to understand if I should keep SA yields into account for buying decisions. Thanks much in advance :-) Does the table Kevin presented here on Sept 18 fit your request? It shows Ask yields and SA yields for some 2027 and 2028 TIPS. The table is super interesting, but my question is about actually understanding what SA yield is -- basically it's "SA yield for dummies" :-) Edit: even a link to some other post or information would be great :-) Does this help: https://www.bls.gov/cpi/seasonal-adjustm...
by BlueEars
Mon Sep 19, 2022 8:53 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: Trading Treasuries (nominal and TIPS)

squirrel1963 wrote: Mon Sep 19, 2022 8:24 pm I would love to hear an explanation of how SA (seasonally adjusted) inflation affects TIPS yields.
So far I have just been buying at any given year the highest available YTM while keeping at a reasonable inflation factor, but I still need to understand if I should keep SA yields into account for buying decisions.
Thanks much in advance :-)
Does the table Kevin presented here on Sept 18 fit your request? It shows Ask yields and SA yields for some 2027 and 2028 TIPS.
by BlueEars
Sun Sep 18, 2022 11:56 am
Forum: Investing - Theory, News & General
Topic: What Fed terminal rate is currently priced into the bond market?
Replies: 33
Views: 4595

Re: What Fed terminal rate is currently priced into the bond market?

But is quantitative tightening priced into the bond market? The author of this article seems to think the answer is "not quite".

https://tipswatch.com/2022/08/07/is-the ... t-so-much/

Image
by BlueEars
Sun Sep 18, 2022 11:03 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: Trading Treasuries (nominal and TIPS)

I don't know much about QE or QT but thought this article interesting: https://tipswatch.com/2022/08/07/is-the-federal-reserve-really-tightening-so-far-not-so-much/ Here is a look back at the Fed’s moves to “ease” and “tighten” over the last 11 years: https://i.postimg.cc/J4ZDQ5v6/image4.jpg It seems clear to me that if the Fed ever wants to institute quantitative easing again in the future (and you know it will) it has to first drastically reduce its balance sheet, probably down to at least the September 2019 level of $3.8 trillion. That will take a lot of quantitative tightening, over a period of two years, or more. Unfortunately, that sort of sustained tightening is not likely. And so … inflation will continue to be a problem. And inflat...
by BlueEars
Thu Sep 08, 2022 8:02 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: Trading Treasuries (nominal and TIPS)

The 5 year rates I am quoting are from the Treasury website after close. These rates were also shown close to the end of session on the Bloomberg site here:
https://www.bloomberg.com/markets/rates ... t-bonds/us.

Generally I look at those before clicking on the VG site for specific issues. I don't know what issue these sites are referring to as "5 year TIPS".

Here is what I see at VG after hours:

Image

If I were buying right now maybe I'd go with the 01/15/2027 or even the 01/15/2028, assuming they have fairly low inflation factors.
by BlueEars
Thu Sep 08, 2022 4:53 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: Trading Treasuries (nominal and TIPS)

Any strategies for buying 5 year TIPS? I figured out what amount of TIPS I want to eventually hold (to get the fixed income to 50/50 nominal/inflation adjusted). I recently bought what I consider about a 1/3 position of the 5yr TIPS that I want to eventually hold. Bought at 0.83%. Today I see these are at 0.93%. My intention was to buy as they go up. But I've not set the idea of what rate to pull the trigger. They got up just above 1.0% in 2018. So for me 1.0% is a psychological threshold but not based on any firm foundation. P.S. I hope this is not OT as this thread seems to focus on short term TIPS. Kevin, if this is OT then I could start another thread. --------------------------- Edit to add this. As we see, the recent sharp upward move...
by BlueEars
Thu Sep 01, 2022 9:29 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: Trading Treasuries (nominal and TIPS)

If I am not sure about the mechanics of a TIPS or Treasury purchase I call the VG bond desk: 800.669.0514 open 8-5:30 EST

They can also help if you want to purchase for multiple accounts and distribute the larger number of TIPS to each account (e.g. like for 2 Roth IRA's and a traditional IRA). Might get a better price then.
by BlueEars
Thu Sep 01, 2022 2:42 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: Trading Treasuries (nominal and TIPS)

Kevin M wrote: Thu Sep 01, 2022 1:41 pm
BlueEars wrote: Thu Sep 01, 2022 7:42 am UPDATE: I purchased about 1/3 of my intended position in 5 yr TIPS at 0.827%. Will purchase more if they move up or stabilize at this level for maybe a month.
Are you referring to the Apr 2027 at 4.62 years as the 5-year? That's the one I see a yield close to your purchase yield. The Jul 2027 at 4.87 years is closer to 5-year maturity, so that's what I think of as the 5-year right now.

For best yields pulled from Fidelity about 30 minutes ago, the Apr 27 is 0.85% and Jul 27 is 0.75%, but both are 0.73% seasonally adjusted.

Kevin
Yes the 4/15/27 is what I purchased. Not quite 5 years. Has a low inflation factor.
by BlueEars
Thu Sep 01, 2022 8:37 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: Trading Treasuries (nominal and TIPS)

Knowing that I have a decent inflation protection for 5 years is important to me. Are most of your anticipated expenses happening in 5 years? If you anticipate expenses BEYOND 5 years, why not protect yourself from inflation and interest rate risk for those expenses? Perhaps by purchasing a 10-year or even 20-year TIPS to go along with your 5-year TIPS. At my age a 10 yr TIPS would be attractive if the rates were higher. The real yield on 2032 TIPS is higher than the yield on 2027 TIPS, and you're receiving that extra yield for TWICE as long with LESS interest rate rater risk. What's unattractive about that? Note I did not say the 10yr TIPS are unattractive, just not that exciting. According to one source the real returns on nominal 5yr an...
by BlueEars
Thu Sep 01, 2022 8:23 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: Trading Treasuries (nominal and TIPS)

vineviz wrote: Thu Sep 01, 2022 7:58 am
BlueEars wrote: Thu Sep 01, 2022 7:42 am
Knowing that I have a decent inflation protection for 5 years is important to me.
Are most of your anticipated expenses happening in 5 years?

If you anticipate expenses BEYOND 5 years, why not protect yourself from inflation and interest rate risk for those expenses? Perhaps by purchasing a 10-year or even 20-year TIPS to go along with your 5-year TIPS.
At my age a 10 yr TIPS would be attractive if the rates were higher.
by BlueEars
Thu Sep 01, 2022 8:23 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: Trading Treasuries (nominal and TIPS)

vineviz wrote: Thu Sep 01, 2022 7:58 am
BlueEars wrote: Thu Sep 01, 2022 7:42 am
Knowing that I have a decent inflation protection for 5 years is important to me.
Are most of your anticipated expenses happening in 5 years?

If you anticipate expenses BEYOND 5 years, why not protect yourself from inflation and interest rate risk for those expenses? Perhaps by purchasing a 10-year or even 20-year TIPS to go along with your 5-year TIPS.
At my age a 10 yr TIPS would be attractive if the rates were higher.
by BlueEars
Thu Sep 01, 2022 7:42 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: Trading Treasuries (nominal and TIPS)

With 5 year TIPS hitting +0.75% today this brings up a question for me. I have two choices if I want to maintain a 50/50 mix of inflation protected and nominal Treasuries over the longer term. 1) Hold my 4/15/2023 TIPS (purchased in 2018) and buy the 5 year TIPS as well. This will mean I have more TIPS in the mix until April. 2) Sell the 4/15/2023 TIPS and use the proceeds to buy 5 year TIPS. Any opinions on which is best? To better understand your question, is there a 3rd option? Why not just hold your current 50-50 mix until your 4/15/23 matures. Then use the proceeds to buy the 5 yr at whatever price Mr. Market is offering by then? Suppose I do hold off buying the 5 yr. If it went down quite a bit I would regret not having pulled the tr...
by BlueEars
Wed Aug 31, 2022 11:51 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: Trading Treasuries (nominal and TIPS)

With 5 year TIPS hitting +0.75% today this brings up a question for me. I have two choices if I want to maintain a 50/50 mix of inflation protected and nominal Treasuries over the longer term. 1) Hold my 4/15/2023 TIPS (purchased in 2018) and buy the 5 year TIPS as well. This will mean I have more TIPS in the mix until April. 2) Sell the 4/15/2023 TIPS and use the proceeds to buy 5 year TIPS. Any opinions on which is best? To better understand your question, is there a 3rd option? Why not just hold your current 50-50 mix until your 4/15/23 matures. Then use the proceeds to buy the 5 yr at whatever price Mr. Market is offering by then? Suppose I do hold off buying the 5 yr. If it went down quite a bit I would regret not having pulled the tr...
by BlueEars
Wed Aug 31, 2022 8:26 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: Trading Treasuries (nominal and TIPS)

With 5 year TIPS hitting +0.75% today this brings up a question for me. I have two choices if I want to maintain a 50/50 mix of inflation protected and nominal Treasuries over the longer term.

1) Hold my 4/15/2023 TIPS (purchased in 2018) and buy the 5 year TIPS as well. This will mean I have more TIPS in the mix until April.

2) Sell the 4/15/2023 TIPS and use the proceeds to buy 5 year TIPS.

Any opinions on which is best?
by BlueEars
Wed Aug 31, 2022 3:53 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: Trading Treasuries (nominal and TIPS)

I just noticed that the 5 year TIPS (4/15/27) are at +0.75% near the close today. Getting very tempting.
by BlueEars
Thu Aug 18, 2022 2:53 pm
Forum: Investing - Theory, News & General
Topic: TIPs: The final year in the life of a 5 year TIP
Replies: 125
Views: 14211

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

I just kind of wonder if Grok87 wants this thread to deviate so much from his final year of the 4/15/23 TIPS.
by BlueEars
Tue Aug 16, 2022 6:10 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: Trading Treasuries (nominal and TIPS)

Thanks Kevin (and Doc).
by BlueEars
Tue Aug 16, 2022 4:07 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: Trading Treasuries (nominal and TIPS)

So the real yields for the 1/23, 4/23 and 7/23 TIPS are all up today so which one is the best/smartest buy if looking to add a $10-$20K (TBD) 2023 rung to a 5 year TIPS ladder? My TIPS ladder is just to help maintain my purchasing power of some of my fixed income and not to meet any specific liabilities during the 5 year term. bpg I would buy either the 1/15/23 or 7/15/23, depending on what term you prefer. Shorter maturity = less price risk, more reinvestment risk, and vice versa. The 4/15/23 seasonally adjusted yield is again below that of the 1/15/23. At one point today I got these quotes; TIPS 1/15/23 1.035% Tbill 1/19/23 2.928% I really have not followed the seasonal adjustment calculations for short term TIPS. How do you decide that ...
by BlueEars
Mon Aug 15, 2022 3:06 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: Trading Treasuries (nominal and TIPS)

Yikes Kevin! You are pretty much the smartest guy in the room here, and even you don't totally understand what you are buying. I appreciate you trying to honestly tackle these uncertainties, and being transparent about the puzzles. I am also trying to figure this out, and how to build a secure little bond ladder without succumbing to the temptation of trying to time the market. I do feel nominal treasuries are clear cut; you pay the price and you know what they will mature at. TIPS appear to me to be much more complicated. I try and hang on to the fact that I am buying a real yield, but the mathematical intricacies are daunting. Respectfully, billyt One of the reasons I post is to learn as well as to share what I've learned. I've learned s...
by BlueEars
Mon Aug 15, 2022 9:07 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: Trading Treasuries (nominal and TIPS)

Good article on QT. Thanks Jaylat.

Maybe QT will give me a better deal on TIPS. When QT happened in 2018-2019 it looks like Tbills were falling. 5yr TIPS declined then. Maybe with Tbills rising and QT happening in coming months TIPS will rise in yield?
by BlueEars
Sun Aug 14, 2022 2:47 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: Trading Treasuries (nominal and TIPS)

What level of 5yr TIPS would you be a buyer at? None. 1) We don't have a liability matching portfolio. 2) Boglehead's mantra was TIPS are "just like nominals except for the inflation protection". Then along came the 2008 market crash and TIPS crashed along with stocks. I had to sell our entire TIPS ladder to rebalance and never went back. If we did have a liability matching portfolio the "level" of TIPS would be irrelevant when the FED is raising interest rates by 50 bps every 8 weeks in order to reduce inflation which also reduces that TIPS return along with it. (To be clear if we did still have a TIPS position I wouldn't necessarily be selling it now either.) We don't have a liability matching portfolio either. Just t...
by BlueEars
Sun Aug 14, 2022 12:32 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: Trading Treasuries (nominal and TIPS)

But what about the 5 year TIPS? Kind of in between short and long term. I had 10 year TIPS in 2008 and remember that unpleasant ride which added to equity losses. I don't know how 5 yr TIPS responded back then. Did you see my chart comparing 5 yr Treasuries and 5 yr TIPS about 3 pages back? See below for it again. Also with inflation being so poorly modeled, how can we expect that the market gets in right in pricing intermediate Treasuries? Interested in your perspective Doc (and others perspective here too). I am not currently interested in intermediate term fixed income. The FED is raising interest rates by some 50 bps per FOMC meeting. With that kind of expected change I don't care about intermediate term for my current investment choic...
by BlueEars
Sun Aug 14, 2022 11:46 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: Trading Treasuries (nominal and TIPS)

Hi Protagonist, what does the tool use for the TIPS choice?

Oops, I found it and it is VIPSX. Average effective maturity = 7.6 years.
by BlueEars
Sun Aug 14, 2022 9:44 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: Trading Treasuries (nominal and TIPS)

by protagonist » Fri Aug 12, 2022 7:27 pm Kevin M wrote: ↑Fri Aug 12, 2022 1:22 pm The positive spin is that if there is deflation, the cost of things is going down on average, so the purchasing power of your TIPS is not declining (other than due to negative real yield). Kevin Right, and something people tend to overlook. If you wind up with less than what you invested, but if deflation more than compensates for that, you still "win" in terms of purchasing power . When there was deflation in the early days of COVID and we were earning essentially zero interest in our bank accounts we were still winning. Only "real" gain or loss matters, not nominal. I disagree. TIPS are a protection against unexpected inflation. Expecte...
by BlueEars
Fri Aug 12, 2022 7:20 pm
Forum: Investing - Theory, News & General
Topic: I Bonds Mega Thread (I Bond Heads Rejoice!)
Replies: 6651
Views: 1202606

Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Today I ran the iBond calculator from Treasury Direct as I have done monthly for years. But now I get a number for my ibonds that is much lower then previous results . The calulator is here: https://treasurydirect.gov/BC/SBCPrice For instance, for a $10,000 ibond purchased on 04/01 the value shown is $32,628 for 07/22. The number I got when I last ran it in July was $34984 !! :( That is a big difference. Here is the Treasury Direct data: https://i.postimg.cc/pTRJL0b4/image3.jpg I looked back at previous results and the same thing is happening, the current calculator shows a value quite a bit lower then my previous numbers. The current calculator did not have a record of my previous inputs for the issue date and it had that for many years. ...
by BlueEars
Fri Aug 12, 2022 7:02 pm
Forum: Investing - Theory, News & General
Topic: I Bonds Mega Thread (I Bond Heads Rejoice!)
Replies: 6651
Views: 1202606

Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Today I ran the iBond calculator from Treasury Direct as I have done monthly for years. But now I get a number for my ibonds that is much lower then previous results . The calulator is here: https://treasurydirect.gov/BC/SBCPrice For instance, for a $10,000 ibond purchased on 04/01 the value shown is $32,628 for 07/22. The number I got when I last ran it in July was $34984 !! :( That is a big difference. Here is the Treasury Direct data: https://i.postimg.cc/pTRJL0b4/image3.jpg I looked back at previous results and the same thing is happening, the current calculator shows a value quite a bit lower then my previous numbers. The current calculator did not have a record of my previous inputs for the issue date and it had that for many years. S...
by BlueEars
Sun Aug 07, 2022 7:37 pm
Forum: Investing - Theory, News & General
Topic: Asymmetric risk with nominal vs. inflation-linked bonds
Replies: 539
Views: 39808

Re: Asymmetric risk with nominal vs. inflation-linked bonds

The bet for someone that only wants a real return is that they aren’t missing a big opportunity for making that choice. Many realize that the 'big opportunity' could turn into a 'much bigger cost'. Nobody knows what future inflation will be, so nobody knows in advance whether nominal bonds or TIPS will have higher real returns. TIPS are bought to eliminate the downside risk from inflation, which is much greater than the upside potential of nominal bonds. Agree that the certainty in buying TIPS is worth it. Especially now as we are all quite tuned into what will happen next with inflation. And it seems inflation modeling is not understood by experts. As you can see from the chart I posted above today, the TIPS (blue line) from 2017 are now ...
by BlueEars
Sun Aug 07, 2022 3:33 pm
Forum: Investing - Theory, News & General
Topic: Asymmetric risk with nominal vs. inflation-linked bonds
Replies: 539
Views: 39808

Re: Asymmetric risk with nominal vs. inflation-linked bonds

I have about 50% of our fixed income in individual inflation indexed bonds. This thread is interesting to me because I'm retired and have been watching the rates a lot recently. Friday short term TIPS popped up quite a bit, example is the 1/15/24 was quoted at 0.30%. Elsewhere I posted a chart comparing the history of TIPS to nominal Treasuries. Of course, we only know the outcome of nominal Treasuries through mid 2017 because beyond that we don't have the forward numbers for inflation yet. https://i.postimg.cc/rpcLQ0HS/image3.jpg I'm strongly leaning to buying more TIPS and thus taking the risk/reward in equities with a known situation in FI. My criteria is that longer term TIPS should have a positive yield to maturity. One investor I resp...
by BlueEars
Thu Aug 04, 2022 9:51 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: Trading Treasuries (nominal and TIPS)

Just looked at comparable quotes:

TIPS 4/15/23 -0.458%
Tbill 4/20/23 2.911%

So maybe the market is expecting something like 2.9 - (-0.5) = 3.4% inflation for this period of 8.5 months ? Or is this too simplistic an interpretation?
by BlueEars
Wed Aug 03, 2022 10:55 am
Forum: Investing - Theory, News & General
Topic: Momentum factor and trend following
Replies: 47
Views: 4132

Re: Momentum factor and trend following

Logan Roy wrote: Wed Aug 03, 2022 10:15 am ... Momentum's just a way to measure the latency of information as it moves through markets, and to some extent, the time it takes for large investors to build and exit positions. Which is why it seems very persistent. To erase momentum, markets would need the ability to price in sudden step changes in price, which isn't common.
I like that "latency of information" way of describing it.
by BlueEars
Tue Aug 02, 2022 7:27 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: Trading Treasuries (nominal and TIPS)

5 year TIPS went up nicely today to around 0.16%. I would like to buy at around 1.0% if that happens. On June 14th they actually got up briefly to 0.73%.

Here is a chart I made comparing 5 year Treasury real yields and TIPS. Of course, for nominal Treasuries the history is not know for 5 years.

Image
by BlueEars
Wed Jul 27, 2022 4:35 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455449

Re: Trading Treasuries (nominal and TIPS)

The shortest TIPS maturity I could find is 1/15/23 TIPS at -2.0%. Might compare that to the 1/12/23 T-bills at 2.8%. I guess the market expects around 4.8% inflation for that period. I don't have an opinion how realistic that is. Those are annualized rates, so since it is about a 6 month period a 2.4% change in the non-seasonally adjusted CPI would be the approximate break-even point. But we already know that the reference CPI rises by about 1.55% from today through Sept. 1. So there would need to be about another 0.9% increase from Sept. 1 to Jan. 15. Note that TIPS rates fell today and WSJ is now showing -2.4% for the 1/15/23 TIPS, I also see 2.93% as the 6 month rate on treasury yield curve site. Using those the BEI would be 5.33% and t...