Search found 15615 matches

by Kevin M
Tue Mar 26, 2024 3:35 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 465505

Re: Trading Treasuries (nominal and TIPS)

samulta52 wrote: Tue Mar 26, 2024 2:56 pm
silvergga wrote: Thu Mar 14, 2024 12:46 pm Quite a few 2040s TIPs with YTM > 2.2%. Purchased some for my ladder.
These are still > 2%. Worth buying? I would be 72 then and collecting SS.
Yes, 2% is an attractive rate historically. I would buy at least enough to cover your residual expenses; i.e., expenses not covered by social security and other safe income streams.
by Kevin M
Tue Mar 26, 2024 11:16 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 465505

Re: Trading Treasuries (nominal and TIPS)

Kevin, I have an evolving TIPS ladder with rungs filled in from 2024 through 2028, and then rungs from 2032 through 2034. I'm presently looking to finish my ladder filling in the 2029, 2030 and 2031 rungs. I do have one ladder year with 2 TIPS (both April 2027 and October 2027) and thinking maybe it makes sense to sell one of these 2027 TIPS to fill one of the missing years (Oct 2027 appears a close fit to July 2031 from looking at yields?). I also have the upcoming Oct 2024 TIPS that you're personally starting to consider liquidating some to fill in some of your outer years of your TIPS ladder so that also is a potential short-term sale target as don't need the funds. One last data point is I am also open to selling some or all of my exis...
by Kevin M
Mon Mar 25, 2024 4:34 pm
Forum: Investing - Theory, News & General
Topic: Taxation of Treasury bills, notes and bonds
Replies: 1067
Views: 155921

Re: Taxation of Treasury bills, notes and bonds

Accrued market discount is reported by the broker as an adjustment to capital gains in box 1f of 1099-B for the year in which the security is disposed of (sold or matures). This accrued market discount is entered as interest by the tax preparer on Schedule B. There is some debate as to whether accrued market discount is exempt from state and local income tax. It may vary by state. Kevin Hello, I've been keeping up with this topic because for tax year 2023 I have to file for the first time proceeds from treasury notes. I do my tax returns by hand. I received my 1099-B from Fidelity that shows the short-term transaction gain with a note that Form 8949 is to be filed and/or Schedule D, Part I. When I complete Form 8949, with box A checked, it...
by Kevin M
Mon Mar 25, 2024 12:47 pm
Forum: Investing - Theory, News & General
Topic: Fidelity CD down
Replies: 16
Views: 2353

Re: Fidelity CD down

gavinsiu wrote: Mon Mar 25, 2024 12:34 pm Assuming if the cd was callable. If call you would also get the full principle back?
Yes.
by Kevin M
Mon Mar 25, 2024 12:16 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 465505

Re: Trading Treasuries (nominal and TIPS)

When reported to the IRS, if sold, would the loss reported on the Fidelity web page be the same amount as the loss I could claim on my 1099-B, because it takes into account taxes already paid on phantom income? The 1099-B from Fidelity will show the adjusted basis in the cost or other basis box (1e). The loss will depend on the actual sales proceeds, which is unlikely to be exactly the same as the market value Fidelity shows on the positions page, since the bid price they use to determine market value is unlikely the same as what you'd actually get when you sell. But it would be in the ballpark if you sold today. This is the same as with reinvested dividends in a fund. You've already paid the tax on the dividends, so your basis is increase...
by Kevin M
Mon Mar 25, 2024 12:08 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 465505

Re: Trading Treasuries (nominal and TIPS)

I'm not sure you get it. You're still focusing on sunk costs, which are irrelevant in making investment decisions that depend on future returns. That brings to mind another way of viewing it. What would your losses be on the 2034 (or 2033) or 2040 if you had bought them when you bought the 2024-2027 TIPS? You have losses because yields are higher now than when you bought. To the extent that longer-term yields also are higher, your losses on the shorter-term TIPS are being compensated by higher yields (and returns) on the longer-term TIPS. I think I do get it. Please try to follow my reasoning and let me know if it makes sense to you. I think I did follow it. The part that makes me wonder if you get it is continuing to focus on the loss, wh...
by Kevin M
Mon Mar 25, 2024 11:00 am
Forum: Investing - Theory, News & General
Topic: Taxation of Treasury bills, notes and bonds
Replies: 1067
Views: 155921

Re: Taxation of Treasury bills, notes and bonds

A data point about entering Accrued Market Discount for State tax filing. I'm using TurboTax 2023 Home&Business. I bought 2 Treasury bonds on secondary market and held to maturity. Fidelity 1099B reports the difference between purchase price & par as AMD. TT offers two ways to enter 1099B. The 'summary' approach won't work for AMD. So I entered the numbers for trades one by one. There is a button you could select to enter AMD to box 1F. Then TT will report capital gain = 0 on form 8949, and AMD as interest income on Schedule B. So no dummy 1099-INT needed. However, the State tax part doesn't treat this AMD as government obligations and charge me state tax (I'm a CA resident). When I played State Tax part, there is a radio 'Interest...
by Kevin M
Sun Mar 24, 2024 2:06 pm
Forum: Personal Investments
Topic: Bond ladder for regular fixed payment
Replies: 13
Views: 1786

Re: Bond ladder for regular fixed payment

I just compare the yields. I've bought STRIPS without even realizing that's what I was buying--I just saw zero coupon and a good yield, and maybe thought I was buying a bill. Only on secondary. You can read more about STRIPS here: STRIPS — TreasuryDirect . I did not realize strips were a direct treasury product. I though brokerage brought treasury and convert them to strips. Thanks. They are not a direct Treasury product. Financial Institutions, brokers, and dealers use the commercial book-entry system to hold Treasury marketable securities on behalf of investors. Because you can’t strip or reassemble in TreasuryDirect or Legacy Treasury Direct, all STRIPS are held in the commercial book-entry system and stay there when reassembled. You ca...
by Kevin M
Sun Mar 24, 2024 1:57 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 465505

Re: Trading Treasuries (nominal and TIPS)

I get that. Currently, if I sell the 2025s through 2027s , acc. to Fidelity's "Positions" page, I would be selling at a loss totaling close to $2700. That's a pretty big hit. I question whether I would ever recover that if I used the proceeds to buy 2034s and 2040s today at close to 2% YTM. I'm not sure you get it. You're still focusing on sunk costs, which are irrelevant in making investment decisions that depend on future returns. If you sell a shorter-term TIPS that currently has a yield of about 2% to buy a longer-term TIPS with a yield of about 2%, and hold it to maturity, you'll earn about the same over the period from now until maturity of the shorter-term TIPS. The loss you have already incurred on the shorter TIPS is irr...
by Kevin M
Sun Mar 24, 2024 10:30 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 465505

Re: Trading Treasuries (nominal and TIPS)

Now YTMs are much higher than when I purchased my earlier maturing TIPS, so many of those earlier maturity TIPS (2024-2027 for example) would likely sell at a real loss today, if I wanted to sell them prematurely in order to overweight, for example, 2034s and 2040s to cover the gap years. So if I do sell some of my earlier TIPS (2024-27) prematurely NOW to overweight 2034s and 2040s at current (higher) YTMs, would I never fully recover what I would initially lose by selling 2024-2027s prior to maturity (because, if I understand correctly, of "non-parallel yield shifts")? In that case, at this point I am probably better off just waiting until my current TIPS mature to buy the gap years, and accepting the reinvestment risk. I hope ...
by Kevin M
Sun Mar 24, 2024 10:13 am
Forum: Personal Investments
Topic: Bond ladder for regular fixed payment
Replies: 13
Views: 1786

Re: Bond ladder for regular fixed payment

gavinsiu wrote: Sat Mar 23, 2024 2:42 pm
Kevin M wrote: Sun Mar 17, 2024 11:39 am So you get one stripped principal STRIPS and many stripped interest STRIPS per original note or bond.

But why worry about it? If the yield is attractive, go for it.
Question, what's a good way to compare the STRIPS to PAR bonds if I just want to compare them. Do STRIPS get offered directly from the treasury or since it's a secondary product, it's only available secondary?
I just compare the yields. I've bought STRIPS without even realizing that's what I was buying--I just saw zero coupon and a good yield, and maybe thought I was buying a bill.

Only on secondary. You can read more about STRIPS here: STRIPS — TreasuryDirect.
by Kevin M
Sat Mar 23, 2024 2:26 pm
Forum: Investing - Theory, News & General
Topic: Fidelity CD down
Replies: 16
Views: 2353

Re: Fidelity CD down

Hi, I bought a four-year, non-callable CD from Fidelity. It is from UBS Bank. It shows that it is down in value. I have never heard of this happening with a CD. I called, and they said it's normal and I will get what I expected return-wise at the end of the term. So, is this okay? Thanks! Perhaps you have only owned or "heard of" direct CDs before; i.e., CDs bought directly from a bank. Since these are not marketable, other than doing an early withdrawal and selling it back to the bank, there is no market to price them, so you'll never see a "price" for them. As others have said, brokered CDs are marketable, and so they have a price based on market conditions. If yields are higher than when you bought, the value of your...
by Kevin M
Sat Mar 23, 2024 2:16 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 465505

Re: Trading Treasuries (nominal and TIPS)

protagonist, your reasoning is too complex for me to follow with a brief read. I view it more simply. I would buy the 2035 if I could. Since I can't, I want to buy the closest thing to it, which is mostly the 2034, but a little 2040 to increase the duration a bit so it's closer to the duration of the 2035 if it existed. As MtnBiker says, we could use shorter and longer maturity TIPS to do something similar, as long as the average duration is close to the duration of a hypothetical 2035 TIPS. But as I said, the further away you get on the yield curve, the more likely non-parallel yield curve changes are to cause the average value of the gap-fill-TIPS to diverge from the cost of the 2035 when it's issued. Why not just use the closest maturiti...
by Kevin M
Sat Mar 23, 2024 12:48 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 465505

Re: Trading Treasuries (nominal and TIPS)

The post I was actually thinking of was this one: https://www.bogleheads.org/forum/viewtopic.php?p=7710565#p7710565. Here's the table I came up with: Here is the table with weights shown to 2 decimal places: ModDur Maturity 2034 wt 2040 wt ------ -------- ------- ------- 9.80 01/15/35 0.82 0.18 10.60 01/15/36 0.64 0.36 11.39 01/15/37 0.46 0.54 12.05 01/15/38 0.30 0.70 12.80 01/15/39 0.13 0.87 Sum wts -> 2.35 2.65 Each row shows the weights of 2034 and 2040 to hold to match the estimated duration of each of the gap year hypothetical TIPS. So we need weightings of 0.82 and 0.18 of the 2034 and 2040 respectively to match the estimated duration of 9.80 for the hypothetical 2035. I just updated this table based on Friday's yields. This makes som...
by Kevin M
Sat Mar 23, 2024 12:03 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 465505

Re: What is so magical about 2034 and 2040?

What is so magical about 2034 and 2040? Rather than massively overweighting those years, it seems to me that you could fund the gap years with any TIPS you own, and the ultimate result would be very similar. For example, if you want to buy 2035s when they became available, you could just as easily sell 2026s or 2027s or 2047s to fund your purchase , as proportionately selling 2034s and 2040s. Even if the YTMs are wildly disparate, wouldn't the final result essentially even out? So even if you bought 2027s years ago at a YTM of, say, 1%, and the 2035s are offered at a YTM of 2%, the loss you would take on the 2027s when you sold them to buy 2035s would be fairly closely canceled out by the increased YTM of the 2035s. You might come out a li...
by Kevin M
Fri Mar 22, 2024 2:00 pm
Forum: Investing - Theory, News & General
Topic: Managing Market Risk in Holding a TIPS Fund
Replies: 20
Views: 1536

Re: Managing Market Risk in Holding a TIPS Fund

Our investment horizon is more like 20 years. The non-rolling TIPS ladder for 10 to 15 years or perhaps longer is definitely worth pursuing (I am happy to deal with the reinvestment risk and we would not sell a bond before maturity at a loss). If your investment horizon truly is 20 years, just buy a 20-year TIPS, or the closest thing to it which would be the Feb 2044 TIPS. If you want to allow for periodic withdrawals, your investment horizon really isn't 20 years--it's undetermined. I suspect you don't really have plans to spend all of the money in 20 years. Perhaps put the bulk of the money into a TIPS ladder holding TIPS maturing each year from 2044 to 2054, then put a smaller amount maturing each year from 2025 to 2043 for the unexpect...
by Kevin M
Fri Mar 22, 2024 1:50 pm
Forum: Investing - Theory, News & General
Topic: Taxation of Treasury bills, notes and bonds
Replies: 1067
Views: 155921

Re: Taxation of Treasury bills, notes and bonds

I don't trust the broker pricing used for gain/loss Isn't that the same number quoted in Fidelity's end of year tax reports that they report to the IRS? I just meant with respect to the actual gain or loss. As I showed, the actual loss would be a bit smaller based on the actual bid price at the time I looked. But as I said, it's in the same ballpark. The number that would be reported on the 1099-B would be based on the actual sales proceeds, not whatever Fido shows on the Positions page at the time of the sale. The only end of year tax document can think of that has any bearing on income taxes is the 5498, but that's only relevant to IRAs, as it documents the Dec 31 value that's used to calculate the RMD. A difference in maturity of at lea...
by Kevin M
Fri Mar 22, 2024 11:19 am
Forum: Investing - Theory, News & General
Topic: Taxation of Treasury bills, notes and bonds
Replies: 1067
Views: 155921

Re: Taxation of Treasury bills, notes and bonds

This is probably a naive question, but.... Can you do creative tax loss harvesting with TIPS, by selling any TIPS that have lost value relative to cost basis and buying TIPS with similar , but different, maturities? EXAMPLE: Hypothetically, say your (adjusted) cost basis for Jan. 2033 TIPS is $100K, and their current value is $95K . You sell your Jan 2033 TIPS, realizing a $5K loss. You then buy $95K worth of July 2033 TIPS with the proceeds. The only real cost to your portfolio is small bid/ask spreads (and maybe a small difference in YTM), but you get to claim a $5K loss on your taxes. You could do that with all of your TIPS that are selling at a loss, if there are other fairly similar TIPS with close maturity dates and close yields. I t...
by Kevin M
Fri Mar 22, 2024 10:32 am
Forum: Personal Investments
Topic: Nominal treasuries in PreTax 401k?
Replies: 9
Views: 556

Re: Nominal treasuries in PreTax 401k?

I'd prefer TIPS for any maturity more than a couple of years. The expected return is about the same, so why take the unexpected inflation risk?
by Kevin M
Fri Mar 22, 2024 10:23 am
Forum: Investing - Theory, News & General
Topic: Taxation of Treasury bills, notes and bonds
Replies: 1067
Views: 155921

Re: Taxation of Treasury bills, notes and bonds

This is probably a naive question, but.... Can you do creative tax loss harvesting with TIPS, by selling any TIPS that have lost value relative to cost basis and buying TIPS with similar , but different, maturities? EXAMPLE: Hypothetically, say your (adjusted) cost basis for Jan. 2033 TIPS is $100K, and their current value is $95K . You sell your Jan 2033 TIPS, realizing a $5K loss. You then buy $95K worth of July 2033 TIPS with the proceeds. The only real cost to your portfolio is small bid/ask spreads (and maybe a small difference in YTM), but you get to claim a $5K loss on your taxes. You could do that with all of your TIPS that are selling at a loss, if there are other fairly similar TIPS with close maturity dates and close yields. I t...
by Kevin M
Fri Mar 22, 2024 10:00 am
Forum: Investing - Theory, News & General
Topic: Managing Market Risk in Holding a TIPS Fund
Replies: 20
Views: 1536

Re: Managing Market Risk in Holding a TIPS Fund

Our investment horizon is more like 20 years. The non-rolling TIPS ladder for 10 to 15 years or perhaps longer is definitely worth pursuing (I am happy to deal with the reinvestment risk and we would not sell a bond before maturity at a loss). If your investment horizon truly is 20 years, just buy a 20-year TIPS, or the closest thing to it which would be the Feb 2044 TIPS. If you want to allow for periodic withdrawals, your investment horizon really isn't 20 years--it's undetermined. I suspect you don't really have plans to spend all of the money in 20 years. Perhaps put the bulk of the money into a TIPS ladder holding TIPS maturing each year from 2044 to 2054, then put a smaller amount maturing each year from 2025 to 2043 for the unexpect...
by Kevin M
Fri Mar 22, 2024 9:49 am
Forum: Investing - Theory, News & General
Topic: Managing Market Risk in Holding a TIPS Fund
Replies: 20
Views: 1536

Re: Managing Market Risk in Holding a TIPS Fund

This is a question regarding dealing with price fluctuations and interest rate risk while holding a TIPS fund. In another thread, it was stated, to the best of my understanding, that a way to minimize this risk is to hold the TIPS fund (may also apply to any bond fund, I don't know) for two times the average duration of the fund minus one year. So, if an intermediate TIPS fund has an average duration of six years, hold it for 12 years minus one year equals 11 years. My question is: is this guideline effective if there are random withdrawals (say up to one per year in varying amounts not exceeding 3% to 4% of the initial investment) from the fund over the 11 years, or is the assumption that this is a buy and hold investment for the 11 years...
by Kevin M
Fri Mar 22, 2024 9:31 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 465505

Re: Trading Treasuries (nominal and TIPS)

gavinsiu wrote: Thu Mar 21, 2024 8:53 pm I talked with Fidelity and they said you can buy on the same day as maturity.
That's correct, but the problem with that is that the new purchase settles on T+1, so you're out of Treasuries between maturity and settlement. You can call Fidelity and place the order for the new T the trading day before maturity (M-1), since settlement then will be on the maturity date, but you can't do that online unless you have sufficient cash in your money market funds.

At Vanguard and Schwab you can place the T order online on M-1. I do this all the time at Schwab.

This is one of the downsides of Fidelity. However, I think your money goes into the settlement fund on the maturity date, so at least it earns money market interest between M and M+1.
by Kevin M
Thu Mar 21, 2024 9:47 am
Forum: Personal Investments
Topic: Any suggestions for Fixed Income options with Schwab?
Replies: 10
Views: 943

Re: Any suggestions for Fixed Income options with Schwab?

maintain the principal ($700,000) for as long as I can (10yrs?) while withdrawing $4000/month Thank you for your assistance. I'm assuming that you mean withdraw $4,000/month until the money is gone. You can buy a 17-year TIPS ladder generating about $48K/year in inflation-adjusted dollars for about $690K . I would think that you'd appreciate having your income adjusted for inflation. With 3% inflation, it will cost $5,376 in 10 years to buy what costs $4,000 today. Schwab is a good place to buy TIPS, as they offer the best prices for the quantities you'd be buying. Fidelity and Vanguard, for example, off the best prices for larger quantities, like 100 or more. If this interests you at all, there are a number of details that we'd need to ge...
by Kevin M
Wed Mar 20, 2024 1:45 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 465505

Re: Trading Treasuries (nominal and TIPS)

Doc wrote: Wed Mar 20, 2024 1:04 pm I purchased a 26 week T-Bill at auction on Monday 9/18/24. It settles tomorrow 3/21/24.

But is shows in my account now and has current trades at Schwab but not at Vanguard. Trade before issue?

Is this something new or am I just getting forgetful in my old age?
Right, I've seen this before, where a new issue trades after auction but before issue at one broker but not at another.
by Kevin M
Wed Mar 20, 2024 12:44 pm
Forum: Investing - Theory, News & General
Topic: Taxation of Treasury bills, notes and bonds
Replies: 1067
Views: 155921

Re: Taxation of Treasury bills, notes and bonds

ginahoy wrote: Wed Mar 20, 2024 1:01 am Based on what others reported in this thread, Schwab isn't the only broker that reports the entire gain in Box 3f.
I sold lots of Treasuries before maturity in 2019 at Schwab. The accrued market discount did not equal the proceeds minus cost/basis for most of them (it did for one of them). Example:

Proceeds: 9,941.80
Cost: 9,914.00
Accrued market discount (box 1f): 25.61
Realized gain or (Loss): 2.19

Note that proceeds minus cost is 27.80, and that 27.80 - 25.61 = 2.19.
by Kevin M
Wed Mar 20, 2024 10:22 am
Forum: Investing - Theory, News & General
Topic: Why have the current short term TIPS yields plummeted?
Replies: 2
Views: 733

Re: Why have the current short term TIPS yields plummeted?

There's also a seasonality impact:

Image

I'd pretty much ignore the yields for the Apr and Jul 2024 issues because of what jeffyscott explained about them trading like nominal Treasuries, and this is why I truncate the vertical axis of the chart (and to see more resolution). This effect lessens as maturity increases, so after adjusting for seasonality, the Jan 2025 falls pretty nicely on the yield curve.
by Kevin M
Wed Mar 20, 2024 10:14 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 465505

Re: Trading Treasuries (nominal and TIPS)

So assume someone is selling TIPS with 0% yield and now new 10 YR is being offered at 2%, will those 0% in secondary be offered at significant discount to make up for the higher yields now? This is what I am trying to understand. How do I check that buying that 0% vs new one at 2% for given duration, I will come out to be very same at the end. Maybe there is some spreadsheet or formula I can use to get my returns. I think you are confusing coupon with yield. A 10y TIPS at auction will get about the same yield as the secondary market yield on TIPS with similar maturity. So you won't find a 0% yield TIPS with a maturity of about 10 years if the 10y auction results in a 2% yield. Price, yield and coupon are all related. Looking at some exampl...
by Kevin M
Wed Mar 20, 2024 10:02 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 465505

Re: Trading Treasuries (nominal and TIPS)

Thanks. When buying TIPS on secondary mkt, what should newbies look at? I know what duration and amount I want but what to look after that to decide if it is worth buying or not. Do I look at highest yield, inflation factor or something else? In case of multiple TIPS maturing close to each other, how do I know one is better than the other? A lot is this is due to me not properly understanding TIPS. Nominal Treasuries are much simpler as they are more like your typical CD. Even TIPS when I tried during auction, it is simpler as I have an idea of the yield and if I need to buy say 10k, I will be paying close to 10k. But on secondary mkt, too many things to think through and I am not sure if I am making the right calls. So any details would b...
by Kevin M
Wed Mar 20, 2024 9:47 am
Forum: Investing - Theory, News & General
Topic: Now that long TIPS yields are 60 bp off their highs I will…
Replies: 2948
Views: 621364

Re: Now that long TIPS yields are 60 bp off their highs I will…

Question, Kevin: The Oct. 2024s are selling for less than 100. Wouldn't you do better to sell Jan 2025s (if you own any), since they are selling for more than 100? Several thoughts. There are two Jan 2025s. As I've shared, I buy the Jan TIPS with the lower coupon. The 0.250% ask price today is 98.420, and that's the one I own. The 2.375% price is 100.123. Price is a function of the yield and the coupon, and the yield on these is 2.21-2.22%. There are a number of TIPS with price > 100 because the coupon is higher than the yield. For example, the Apr 2032 has a coupon of 3.375%, a yield of 2.01%, and a price of 110.123. I wouldn't sell the Apr 2032s if I owned any (I own Jan and Jul 2032s). So it's not just price I'm considering. The price b...
by Kevin M
Wed Mar 20, 2024 9:03 am
Forum: Investing - Theory, News & General
Topic: Taxation of Treasury bills, notes and bonds
Replies: 1067
Views: 155921

Re: Taxation of Treasury bills, notes and bonds

ginahoy wrote: Wed Mar 20, 2024 1:01 am Based on what others reported in this thread, Schwab isn't the only broker that reports the entire gain in Box 3f. I recall some discussion over the course of this thread about the need to create dummy 1099-INT's to get the correct result in tax software.
With HRB at least, you always need to create a dummy 1099-INT to report the AMD adjustment amount as interest. This has nothing to do whether the amount in box 1f is correct or not.
by Kevin M
Tue Mar 19, 2024 11:50 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 465505

Re: Trading Treasuries (nominal and TIPS)

Is there some easy to follow guide for someone new to buying TIPS on the secondary market? Last Friday I put in my first order for 10 YR TIPS. Plan is to retire in 6-7 yrs. Would like to add more TIPS in my 401k account. The original post in this thread (way back at the top of page 1) is a compendium of links to guides for "how to do this and that." The 2 posts by thefinancebuff only show nominal treasuries which are much easier IMHO compared to the TIPS. Sorry about that. Does this help? https://tipswatch.com/2023/02/05/tips-on-the-secondary-market-things-to-consider/ Harry Sit, author of The Finance Buff blog, wrote a book on TIPS: Explore TIPS: A Practical Guide to Investing in Treasury Inflation-Protected Securities . I see t...
by Kevin M
Tue Mar 19, 2024 11:41 am
Forum: Personal Investments
Topic: 10 Year TIPS Purchase for Ladder - What to buy in 2024
Replies: 8
Views: 1669

Re: 10 Year TIPS Purchase for Ladder - What to buy in 2024

Thanks for the thoughts / input to my previous inquiry; made my initial ladder purchase today of the 2034s at 1.992%. In terms of timing on further secondary market purchases, what factors might be important to consider? Or is it "acceptable" to follow the suggestions at tipsladder.com for building out a ladder with purchases at any time? Any guidance here is much appreciated! No one can say when will be a better time than any other. Yields are attractive now relative to the last 15 years or so--last time we saw 2% on the 10y TIPS was Feb 2009. https://fred.stlouisfed.org/graph/fredgraph.png?g=1iypE I started buying TIPS a couple of years ago when yields were negative. Sure glad I didn't go all in then. The unexpected high inflat...
by Kevin M
Tue Mar 19, 2024 10:43 am
Forum: Investing - Theory, News & General
Topic: Now that long TIPS yields are 60 bp off their highs I will…
Replies: 2948
Views: 621364

Re: Now that long TIPS yields are 60 bp off their highs I will…

That is what I was assuming that is what you were planning to do but what I was wondering if you are happy with the current price on 2034s why you don't just sell the Apr 2024s on the secondary market and buy the 2034s instead of hoping for the trend to continue. Is it that you will lose a few bps on the Apr 2024s or just thinking you will get a better price in a month on the 2034s or something I am missing entirely? You don't lose anything. Sure, there's a small bid/ask price spread, which has been 0.05% most days lately at Schwab, half of which I pay as the seller, but the bid price is more than 100--right now the bid price is 100.12891 at Schwab (for min qty 1 or 100), so you're getting more than the 100 you'll get at maturity, and to m...
by Kevin M
Tue Mar 19, 2024 10:07 am
Forum: Investing - Theory, News & General
Topic: Taxation of Treasury bills, notes and bonds
Replies: 1067
Views: 155921

Re: Taxation of Treasury bills, notes and bonds

I don't think this is correct. The understanding you state in your first sentence is incorrect. Accrued market discount is exactly that, and has nothing to do with the sales proceeds. I see where I erred. Because the "Box 1f" amount on my Schwab 1099-B (labeled as Accrued Market Discount) equals the Proceeds (Box 1d) minus the Cost (Box 1e), I mistakenly assumed AMD represented total gain. In reviewing Pub 550 once again, I see that AMD and RMD are essentially the same. (i.e., RMD is one of two approved methods for calculating AMD). But this doesn't negate my point that Box 1f Accrued Market Discount as listed on my 1099-B is incorrect (this is what I was referring to when I said it's been discussed ad nauseam in this thread). In...
by Kevin M
Mon Mar 18, 2024 2:55 pm
Forum: Investing - Theory, News & General
Topic: Taxation of Treasury bills, notes and bonds
Replies: 1067
Views: 155921

Re: Taxation of Treasury bills, notes and bonds

I don't think ofckrupke meant that the split between amd and cg is shown on the 1099-B. As you noted, it's something we must do ourselves. OK, I must have read too much into ofckrupke's post. I understood his comment "Proceeds less basis is split between..." was referring to his Schwab 1099-B presentation. A Form 8949 filed with the income tax return should have what is on the 1099-B for the sale with "D" in the adjustment code column and the accrued market discount on the 1099-B in the adjustment amount column. My understanding of the term 'accrued market discount' (AMD) is that it refers to the difference between cost or basis and the sale proceeds. However, when a note or bond is sold prior to maturity and the ratabl...
by Kevin M
Mon Mar 18, 2024 2:36 pm
Forum: Investing - Theory, News & General
Topic: Now that long TIPS yields are 60 bp off their highs I will…
Replies: 2948
Views: 621364

Re: Now that long TIPS yields are 60 bp off their highs I will…

TIPS yields are at a recent high today. For those waiting for 2.25% on long TIPS, several of the 204Xs are there. The 2046 ask right now is 2.253, and several others are 2.245-2.247.

I got my highest yield yet on the 2034 at 2.015%, slightly higher than the 2.014% I got on Feb 22, and right now it's at 2.020 at Schwab. Remember that the auction yield in Jan was 1.81%. My dollar-weighted average yield is 1.957%.

I also got my highest yield yet on the 2040, at 2.143%, beating out the 2.133% I got on Feb 13. My average yield is 2.029%.
by Kevin M
Mon Mar 18, 2024 11:29 am
Forum: Personal Investments
Topic: Can I retire with $1.75M at age 43?
Replies: 169
Views: 12502

Re: Can I retire with $1.75M at age 43?

Someone already mentioned a TIPS ladder. I second that. Based on today's TIPS quotes, you can build a 30 year TIPS ladder (through Feb 2054) generating $50K per year of real (inflation adjusted) income for $1.05M. That leaves plenty for the "risk portfolio", which could be 100% stocks for potential upside and living expenses beyond 30 years. If you end up spending somewhat more than $35K per year, you have the extra in the ladder. If you keep your spending to that level, you can roll the extra into the new 30-year TIPS, extending your ladder by a year each year. For example, in Feb 2025 you can buy the new Feb 2055 TIPS with the extra proceeds from your maturing Jan 2025 TIPS (if you choose Jan maturity for some or all of your TIP...
by Kevin M
Mon Mar 18, 2024 9:42 am
Forum: Personal Finance (Not Investing)
Topic: Google Sheets Help Needed
Replies: 4
Views: 421

Re: Google Sheets Help Needed

Are you familiar with FILTER? Here's a quick example of something that might be what you're looking for: ={FILTER(A:C, SEARCH("smith",A:A)); FILTER(A:C, SEARCH("smith",B:B)); FILTER(A:C, SEARCH("smith",C:C)) } I only used 3 columns, but it could work for any number of columns. I did this in the same sheet, but it would work the same in a separate sheet, using the sheet!cell syntax. Here's the data: https://i.postimg.cc/ZqFM0wpM/image.png And here are the results of the FILTER formula: https://i.postimg.cc/J7ddyDHM/image.png image of a safe The formula is in cell E2. Of course you could use a cell reference for "smith" instead of hard coding it into the formula. Here's a new dataset: https://i.postimg....
by Kevin M
Mon Mar 18, 2024 8:41 am
Forum: Investing - Theory, News & General
Topic: Taxation of Treasury bills, notes and bonds
Replies: 1067
Views: 155921

Re: Taxation of Treasury bills, notes and bonds

ginahoy wrote: Mon Mar 18, 2024 12:52 am
ofckrupke wrote: Sun Feb 25, 2024 3:47 pmPre-maturity sales of notes (and bonds, I presume) ARE reported by Schwab on 1099-B. Proceeds less basis is split between accrued market discount and capital gain
I just saw this... That wasn't my experience. I sold two T-notes prior to maturity last year and my Schwab 1099-B put the entire gain in box 1f, with "0" in the Realized Gain or (loss) column. I calculated the 'ratable market discount' and entered in the adjustment column g (f8949), with the difference in gain/loss column h.
I don't think ofckrupke meant that the split between amd and cg is shown on the 1099-B. As you noted, it's something we must do ourselves.
by Kevin M
Sun Mar 17, 2024 2:34 pm
Forum: Investing - Theory, News & General
Topic: Taxation of Treasury bills, notes and bonds
Replies: 1067
Views: 155921

Re: Taxation of Treasury bills, notes and bon

FactualFran wrote: Sun Mar 17, 2024 12:13 pm
Parkinglotracer wrote: Sun Mar 17, 2024 11:06 am It is listed on my vanguard 1099-INT under items not reported to the IRS.
Accrued interest paid is not listed on either Form 1099-INT at the IRS website (https://www.irs.gov/pub/irs-pdf/f1099int.pdf) or on the Form 1099-INT part of the tax reporting statement that I have from a brokerage other than Vanguard. I don't have a brokerage account at Vanguard with bonds on which accrued interest was paid.
Accrued interest is not on the actual 1099-INT. As pointed out, it's in a supplementary section not reported to the IRS. Fido and Schwab also report accrued interest in a supplementary section.

Since it's not actually on the 1099-INT, it's not imported into tax software, which is why you need to handle it yourself.
by Kevin M
Sun Mar 17, 2024 11:39 am
Forum: Personal Investments
Topic: Bond ladder for regular fixed payment
Replies: 13
Views: 1786

Re: Bond ladder for regular fixed payment

Yes, I have seen the article and know that " bond of a given maturity has much greater exposure to interest rate changes than a coupon-paying bond.", but why? Interest rate sensitivity is related proportional to duration. The lower the coupon, the longer the duration for a given maturity. This is because less of the return is delivered earlier in the form of the coupon payments. The duration of a zero coupon bond is equal to its maturity. The duration of a coupon bond is less than its maturity, and the higher the coupon, the lower the duration relative to maturity. Also it's hard to wrap around the split where a coupon bond is split into 2 bond, one that pays coupon but has no principle while one pays the principle but have no co...
by Kevin M
Sat Mar 16, 2024 1:21 pm
Forum: Personal Investments
Topic: 10 Year TIPS Purchase for Ladder - What to buy in 2024
Replies: 8
Views: 1669

Re: 10 Year TIPS Purchase for Ladder - What to buy in 2024

I have unfortunately missed out on the January 2024 auction / new issue of 10 Year TIPS, and am now trying to determine what might now make the most sense - the March or May re-openings, or the July new issue. Or possibly the secondary market? Why is it unfortunate that you missed out on the Jan 2034 auction? The auction yield was 1.81%, while I bought some on the secondary market on Friday at 1.986%. I didn't buy any of the 2034s at auction. I've bought a bunch on secondary between Feb 2 and Mar 15. My dollar-weighted average yield is 1.949%. My low yield was 1.834% on Feb 2, still higher than the auction yield. I'm now 69% or the way toward completing the 2034 "rung" of my ladder. I'm buying 2.44X above what I need for 2034, an...
by Kevin M
Sat Mar 16, 2024 12:00 pm
Forum: Personal Investments
Topic: Bond ladder for regular fixed payment
Replies: 13
Views: 1786

Re: Bond ladder for regular fixed payment

Yes, the nominal treasury ladder is perfect for matching to a nominal expense. Thanks i know it’s rather obvious but i often need assurance that i am on the right track. Are there similar tool as tipbondladder for nominal bonds? Not my area of expertise (since I have no area of expertise) but I think I have seen laddering STRIPS mentioned for nominal expenses like this, although I would like to have someone explain how you allow for the taxes when building a STRIPS ladder. STRIPS are a good choice since you don't have to worry about coupons; i.e., you know exactly what you'll get each year without having to figure out the coupon interest. OTOH, as you imply, you need to pay income taxes on the accrued market discount of all STRIPS annually...
by Kevin M
Fri Mar 15, 2024 2:19 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 465505

Re: Trading Treasuries (nominal and TIPS)

Quite a few 2040s TIPs with YTM > 2.2%. Purchased some for my ladder. All of my purchases are being funded by proceeds from sales of my Jul 2024s, which still are going for > 100, so I'm not losing anything by selling before maturity. Just noticed I also have 07/24 maturing - current price is $100.04688. Can you explain what you meant by "not losing anything by selling before maturity"? I understand we will get $100 back at maturity. I opened the position on 1/18/23 and my cost per unit was $121.94. I explain it in this post: April and July 2024 TIPS - Bogleheads.org . Bottom line is that since the price is higher than at maturity, all we lose is the coupon interest and inflation adjustments between now and maturity. We'll get th...
by Kevin M
Fri Mar 15, 2024 2:08 pm
Forum: Investing - Theory, News & General
Topic: Taxation of Treasury bills, notes and bonds
Replies: 1067
Views: 155921

Re: Taxation of Treasury bills, notes and bonds

Been doing some reading on impact of buying an individual bond (treasury, TIPS specifically) in a taxable account at a bond premium. Not done that before so wanted to make sure I understood implications. Seems to me, that tax impact is pretty straightforward. I'll get interest in box 1 on my 1099 each year, then in box 11 I'll see a bond premium amount from my brokerage that will offset some of the interest paid and this will go on each year I hold the bond or until maturity. And the brokerage handles all the calculations and input. Seems like a non-issue to me and no hassle at all....but...thought I'd post here first in case I'm missing something Kind of. Bond premium on US Treasury obligations in Box 12 of the 1099-INT (not box 11). With...
by Kevin M
Fri Mar 15, 2024 10:05 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 465505

Re: Trading Treasuries (nominal and TIPS)

Quite a few 2040s TIPs with YTM > 2.2%. Purchased some for my ladder. Ditto--well kind of. I noticed that LTPZ was down more than 1% yesterday, so knew long-term TIPS yields would be up. The longer 204Xs were indeed above 2.2%, but it's the 2034 and 2040 that I mostly need more of to fill the gap years, and these were not quite as high. My first purchase was some of the Jan 2034 at 1.943%. Later I noticed that LTPZ was down even more--like -1.5% or something like that, so I took another look. Bought some more 2034s at 1.980%, and bought some 2040s at 2.110%. Note that the 2034 had been down to the auction yield of 1.81% on Monday, 3/12--I bought some for DW at that yield, along with some other TIPS for her ladder because she had a fairly l...
by Kevin M
Wed Mar 13, 2024 2:16 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 465505

Re: Trading Treasuries (nominal and TIPS)

I can now verify that there continues to be a one week lag in auto roll at Schwab. <snip> Thanks, very helpful info. Two quick questions: What happens during the one week lag, are the funds invested in anything? Is a rolling treasuries portfolio (without the lag) preferable to a ST treasury fund such as SNSXX? It seems it is at this moment, with SNSXX at 5.0% and 4 week T at 5.3%. But would that change depending on the yield curve? It's up to you what happens during the one-week lag. If you do nothing, the proceeds will sit in the Schwab settlement fund earning 0.45%, or whatever it is at the time. A better alternative would be to move the cash to a money market fund, which you'd then have to enter a sell order for the day before the aucti...
by Kevin M
Wed Mar 13, 2024 10:18 am
Forum: Personal Investments
Topic: Newbie for Bonds
Replies: 30
Views: 2561

Re: Newbie for Bonds

Thanks for those links. I’m definitely interested in TIPS, but need to understand it better. I see 2 year TIPS on Schwab with 2% coupons selling essentially at Par (2.123 YTM) … but I’m assuming the TIPS portion isn’t reflected in that return right? I am not Kevin M, but yes you are right. For TIPS, the quoted yield is always above inflation. So if you had bought one TIPS on Schwab that you are referring to, if the inflation turns out to be 3%, you will get 5% (or 5.123%) in nominal yield. Thanks. Makes sense. Seems like a pretty safe bet on the near term (1 to 3 year) horizon that TIPS should work out pretty well vs. a traditional UST. Most of us who buy TIPS don't do so based on how well they might do compared to nominal Treasuries. We b...
by Kevin M
Wed Mar 13, 2024 9:51 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 465505

Re: Trading Treasuries (nominal and TIPS)

Somewhat relevant to the last few posts ... Yesterday I decided to buy some 4w Treasuries at auction at Schwab and set them to auto roll. I recall that folks have reported that Schwab doesn't auto roll so that maturity and auction settlement dates match up (i.e., there's a delay), but I vaguely recall that Doc or someone mentioned that they had fixed that, so I wanted to just see for myself. I'm mostly doing this because auto rolling 4w Treasuries might be a good option for a friend I'm helping who has a Schwab account, and I want to make sure I understand how auto roll works at Schwab first. I entered the buy order. Auction is tomorrow, 2/8, with settlement on Tuesday, 2/13. I don't have enough in my MM fund to cover the purchase, but I h...