Search found 3975 matches

by #Cruncher
Wed Mar 27, 2024 3:51 pm
Forum: Personal Finance (Not Investing)
Topic: Take Social Security Now?
Replies: 47
Views: 2362

Re: Take Social Security Now?

Is it advantageous to take S/S now if it would allow us to not draw from out IRA/Roth? This would also allows us to be more comfortable with a higher percentage in stocks in our AA. You seem to have it backward, LaramieWind. Starting SS later would allow you to have a higher percentage in stocks. This is because you should finance the delay by drawing down the bond portion of your portfolio. The rationale for this is explained in this July 2020 post by ObliviousInvestor : ... if you have, for example, decided that filing at 62 and using a 70/30 portfolio is an appropriate level of risk, what about instead filing at 70 and using an 80/20 portfolio? (Just making up the 80/20 here. The actual percentage would depend on the size of your Social...
by #Cruncher
Tue Mar 26, 2024 9:23 pm
Forum: Personal Finance (Not Investing)
Topic: Social Security Break-Even Calculator That Includes Opportunity Cost of Waiting?
Replies: 16
Views: 1512

Re: Social Security Break-Even Calculator That Includes Opportunity Cost of Waiting?

FactualFran 's Oct 2020 post shows the formulas to do this using the Excel FV and NPER functions on rows 11 and 12. Here it is with additional formulas to calculate the monthly benefits for the specified claiming ages based on birth year. [1] FactualFran 's calculation allows one to specify different growth rates before and after the late claiming age. [2] Row Col A Col B Formula in Column B 2 Year born 1954 3 Primary Insurance Amount 1,000 4 Early claim age 62 5 Late claim age 70 6 Rate early age to late age 3.0% 7 Rate after late age 2.0% 8 Normal Retirement Age 66 =MIN(67,66+MAX(0,B2-1954)/6) 9 Benefit if claim early 750 =B$3*IF(B4<B$8,1-(5/900)*MIN(36,(B$8-B4)*12)-(5/1200)*MAX(0,(B$8-B4)*12-36),1+(8/1200)*(B4-B$8)*12) 10 Benefit if cla...
by #Cruncher
Mon Mar 18, 2024 8:53 pm
Forum: Investing - Theory, News & General
Topic: Five Year TIPS Reopening Auction Thursday 12/21/2023 - High Yield 1.710%
Replies: 15
Views: 2655

Re: Five Year TIPS Reopening Auction Thursday 12/21/2023 - High Yield 1.710%

Friday I tried [!] to buy the 10 yr TIPS @auction for the first time using Schwab (CUSIP =91282CJY8). So far I have only bought T bills during auction. Why do you say " tried to buy"? Were you not able to place the order? TIPS auctions work the same as T-Bill auctions. After the auction is announced (March 14) and before it takes place (March 21), you enter your order with the broker. If it's successfully entered, you'll see it as an open order on the broker's web site until the auction when it's executed. What I am not clear is why I [?, don't you mean Schwab's] estimated total cost was higher than what I had expected. For example it was $1007 something if I wanted to buy $1000. I got about the same result when I entered an orde...
by #Cruncher
Mon Mar 18, 2024 4:39 pm
Forum: Personal Finance (Not Investing)
Topic: 5 and 10-yr TIPS at auction, original or reopening?
Replies: 7
Views: 1553

Re: 5 and 10-yr TIPS at auction, original or reopening?

What are the advantages and disadvantages of buying 5 and 10- year TIPS at a reopened Treasury action versus the auction when these TIPS are originally offered ... ? There are no major advantages or disadvantages in my opinion. But a reopening auction does have a minor advantage and a minor disadvantage: Advantage: since the TIPS being auctioned is already trading in the secondary market, we get a better idea of what the yield-to-maturity (YTM) will be. For example, the 1-3/4% 10-year TIPS maturing 1/15/2034 to be re-auctioned this Thursday currently trade at a yield of about 2% (2.013% per today's WSJ TIPS Quotes and 2.01% per Bloomberg US Rates and Bonds ). Unless market conditions change between now and Thursday, we can expect the aucti...
by #Cruncher
Sun Mar 17, 2024 2:45 pm
Forum: Personal Investments
Topic: APY vs YTM
Replies: 10
Views: 1281

Re: APY vs YTM

When I pulled the price of 97.773 [for the bill that matures] on 8/22 for 912797KC0, a six month T-bill issued on 2/22/2024, the Vanguard website displayed a YTM of 5.308%. I am unable to replicate that value with either the Investment Rate computation that Treasury uses for new issues nor with the classical discounted cash flow formula. Any idea how Vanguard was getting this value? It looks like Vanguard is assuming a 366 day year. [*] With that assumption I compute an Investment Rate quite close to the yields Vanguard reports. I just pulled Vanguard's bid and ask quotes for this bill. The prices are shown in cells B8:C8 and the yields in cells B9:C9. The bid yield is within 0.002% points of the Investment Rate shown in cell B10 and the a...
by #Cruncher
Sun Mar 17, 2024 7:17 am
Forum: Personal Investments
Topic: APY vs YTM
Replies: 10
Views: 1281

Re: APY vs YTM

First off, Treasury Bills don't exactly have a yield to maturity or YTM. They have something similar known as the Investment Rate (aka Coupon Equivalent Yield or Bond Equivalent Yield). ... T-bills traded on the secondary market have "Yield to Worst", "Yield to Maturity", and "Effective Yield". Are these equivalent to the Investment Rate? Firstly, my wording in the post you quote from was bad. I've revised it there . I don't know where you see "Effective Yield", but Fidelity has a column labeled "Yield" for bid quotes and two columns, "Yield to Worst" and "Yield to Maturity" for ask quotes; and Schwab has columns labeled "YTM" and "YTW" for both bid a...
by #Cruncher
Fri Mar 15, 2024 4:44 pm
Forum: Personal Finance (Not Investing)
Topic: Spousal social security
Replies: 16
Views: 1781

Re: Spousal social security

I am 16 months younger than my husband so I thought if I received my SS until he claimed at 7/27 then my spousal amount would only be reduced by 25/26 x .01 x 16. Just noticed a typo. You mean to say 25/ 36 X 0.01 X 16, an 11.11% reduction. Am I wrong in thinking that my retirement is permanently reduced from 7/27 and my spousal top up is only reduced by 16 months? You are not wrong. ... I did put the numbers into open social security. [It] had my monthly amount as $1364, with me taking my SS on 7/24 and my husband taking his at 7/27 along with me adding spousal top up then (16 months before my FRA). This is the number I was working off. ... Do you know if this is a glitch of the open social security calculator? This is not a glitch. The O...
by #Cruncher
Fri Mar 15, 2024 10:05 am
Forum: Personal Finance (Not Investing)
Topic: Spousal social security
Replies: 16
Views: 1781

Re: Spousal social security

My PIA is 655. My husbands is 3300. I'm looking to take SS soon (say 7/24) then take half of his SS when he turns 67 on 7/27. ... I am 16 months younger than my husband so I thought if I received my SS until he claimed at 7/27 then my spousal amount would only be reduced by 25/26 x .01 x 16. Apparently your husband was born July 1960 and you 16 months later in November 1961. Both of you have a Normal Retirement Age (NRA) of 67. If you waited to claim until then, you would get a total benefit equal to half of his $3,300 Primary Insurance Amount (PIA). Row Col A Col B Col C Formula in Column B 2 You Husband 3 Birth date Nov-1961 Jul-1960 4 PIA 655 3,300 5 Claim date Nov-2028 Jul-2027 6 NRA 67.000 67.000 =MIN(67,66+MAX(0,YEAR(B3)-1954)/6) 7 C...
by #Cruncher
Thu Mar 14, 2024 4:06 pm
Forum: Personal Investments
Topic: APY vs YTM
Replies: 10
Views: 1281

Re: APY vs YTM

Is a CD's APY directly comparable to a T-Bill's YTM? First off, Treasury Bills don't exactly have a yield to maturity or YTM. They have something similar known as the Investment Rate (aka Coupon Equivalent Yield or Bond Equivalent Yield). The yield-to-maturity or YTM of a Treasury Bill is sometimes referred to as the "Investment Rate" or the "Coupon Equivalent Yield". And even though it isn't usually reported, we can also compute an Annual Percentage Yield or APY for a Treasury Bill that would be directly comparable to the APY of a CD. It will always be slightly higher than the T-Bill's Investment Rate or YTM . [edited 3/17/2024] The following table shows how, given the number of days to maturity, we can convert the Inv...
by #Cruncher
Thu Mar 14, 2024 3:32 pm
Forum: Personal Finance (Not Investing)
Topic: Excel Forumula Help -cumulative percentage growth
Replies: 13
Views: 1269

Re: Excel Forumula Help -cumulative percentage growth

If Numbers does not have the PRODUCT function suggested by JeanneForever, use an additional column to calculate the product using simple cell formulas (in Excel notation): Year Return CumulReturn 1 2012 16.38% =b2 2 2013 33.52% =(c2+1)*(b3+1)-1 3 2014 12.56% =(c3+1)*(b4+1)-1 4 2015 0.39% =(c4+1)*(b5+1)-1 5 A B C col\row For each additional year, add a row, enter the Year and Return, and copy the paste the formula from the previous row for CumulReturn. Here is the same solution turned 90 degrees with two dummy tickers added for illustration. Copy the formulas down for as many funds and right for as many years as you track. ------- Formulas -------- Row Col A Col B Col C Col D Col E Col B Col C Copied Right 2 Ticker 2012 2013 2014 2015 One Y...
by #Cruncher
Wed Mar 13, 2024 7:40 pm
Forum: Investing - Theory, News & General
Topic: Calculating Time to $1MM and each $100k
Replies: 24
Views: 3881

Re: Calculating Time to $1MM and each $100k

9 months is how long it took me to go from $300k to $400k. 15 months passed when starting at $200k and ending on $300k. ... By using ... my two provided time spans, how do I calculate when each $100k increment will be reached starting with $400k to $500k and ending with $900k to $1MM? To double from 200K to 400K in 24 months at a 0.58% monthly growth rate (7% / 12) would require a monthly contribution of $6,630. [*] If we assume these continue, using the NPER function mentioned by FiveK , the following table shows how many months are required to add each $100K increment: Row Col A Col B Formula in Column B 2 Mo rate 0.58% 3 Mo contrib 6.63 4 Value Months 5 200 6 400 24.0 =NPER(B$2,-B$3,-A5,A6,0) 7 500 10.9 | | | 8 600 10.2 | | | 9 700 9.6 ...
by #Cruncher
Wed Mar 13, 2024 8:36 am
Forum: Investing - Theory, News & General
Topic: April and July 2024 TIPS
Replies: 44
Views: 6276

Re: April and July 2024 TIPS

I have a Google Sheets sheet set up to calculate the nominal yield/return of a TIPS for which we know the maturity value, which we do now for the Apr 2024 TIPS . ... The Principal + coupon for 1 bond at maturity, inflation adjusted, is 1,229.466 . ... A purchase today, 3/12/2024, settles tomorrow, 3/13/2024, so we use the index ratio for 3/13, and calculate the accrued interest as of 3/13. The payment/cost of 1 bond and coupon at settlement, 3/13, is 1,223.727 . The holding period return is the maturity value divided by the settlement value minus 1, which is 0.47% ( 0.46896% showing more resolution--numbers are not rounded for subsequent calculations). For anyone interested, here are the steps in Kevin's calculation. He doesn't mention the...
by #Cruncher
Tue Mar 12, 2024 1:38 pm
Forum: Investing - Theory, News & General
Topic: 912797FS1 investment rate?
Replies: 5
Views: 957

Re: 912797FS1 investment rate?

formula: a = $5000 (redemption value) - $4933.65 (price paid) b = (100 - a) ÷ a investment rate = b x (366 / 91) What am I doing wrong? Your first line is wrong, Nyc10036. Instead of 5000 - 4933.65, you need the following to get the price: 98.673 = 100 * (4933.65 / 5000) The next two lines then work OK (assuming the correct choice of days in year). 1.345% = (100 - 98.673) / 98.673 5.395% = 1.345% * (365 / 91) I think auctions before Feb 29th use 366, and auctions after Feb 29th use 365, 2024 being a leap year. I was curious what value the Treasury uses when the issue date [*] is neither before Feb 29 nor after Feb 29 but Feb 29 itself. So I looked at the 13-week bill issued 2/29/2024 . To get the correct 5.400% Investment Rate, we must use...
by #Cruncher
Tue Mar 12, 2024 11:17 am
Forum: Investing - Theory, News & General
Topic: Now that long TIPS yields are 60 bp off their highs I will…
Replies: 2949
Views: 623084

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

Today I sold out of all my TIPS. I had been thinking about this for a while. I don't think they are a good product *for me* since the way inflation is measured doesn't seem to have any correlation to my spending. I have a TIPS from 5 years ago that is about to mature. The total principal appreciation has been < 20%. Compared to 5 years ago, my spend is up at least 50% if not more. And I have not upgraded my lifestyle in any way. (underline added) You seem to be referring to the 0-1/2% 5-year TIPS maturing 4/15/2024 . If you bought this TIPS at the initial auction 4/18/2019 , you obtained a 0.515% real yield to maturity. With this morning's release of the February CPI report , we now know this TIPS' index ratio on its 4/15/2024 maturity dat...
by #Cruncher
Mon Mar 11, 2024 7:59 am
Forum: Investing - Theory, News & General
Topic: Taxation of Treasury bills, notes and bonds
Replies: 1075
Views: 157036

Re: Taxation of Treasury bills, notes and bonds

I inherited a TIPS from my sister in a taxable account at Vanguard last year and sold it shortly thereafter. ... She purchased CUSIP 9128285W6 on 1/11/23: Face Value $5,000 I sold it on 5/11/23 for $5,854.65 with a cost basis of $4,872.34, yielding a long-term (inherited?) capital gain of $949.15 and an accrued market discount of $33.16 . ... So, it appears that I’m paying capital gains tax on the inflation adjustment she purchased when she bought the TIPS. When looking at the OID calculation sheet, they showed ... a cost basis of $4,785.93 on the date of her death, 2/28/23, ... The TIPS in question is the 0-7/8% 10-year maturing 1/15/2029 . The $5,854.65 proceeds seem to reflect the index ratio (see cell D10 below), while the $4,785.93 co...
by #Cruncher
Sat Mar 09, 2024 3:04 pm
Forum: Personal Finance (Not Investing)
Topic: Banktivity for Mac: How to Enter an Inflation Protected Security
Replies: 1
Views: 289

Re: Banktivity for Mac: How to Enter an Inflation Protected Security

RooseveltG wrote: Thu Mar 07, 2024 12:59 pmI use Banktivity 8 on a Mac and cannot figure out how to enter an individual inflation protected treasury. When entering a a TIP purchase, the program multiplies the price by the number of bonds to calculate the purchase amount. The actual purchase amount however, is higher because there is an inflation adjustment.
Use the Adjusted Price. For example, if you bought at the 11/21/2023 re-opening auction of the July 2033 10-year TIPS, you'd enter 94.285157 as the price. You can also calculate the adjusted price by multiplying the unadjusted price by the index ratio (aka inflation factor). Or, from a broker's statement, just divide the market value by the face value.
by #Cruncher
Thu Mar 07, 2024 7:05 am
Forum: Personal Finance (Not Investing)
Topic: Where to report ibond 1099 income on NYS form IT-201?
Replies: 1
Views: 282

Re: Where to report ibond 1099 income on NYS form IT-201?

Any tips on where to report ibond 1099 info on New York State form IT-201, doing paper filing (not using tax software)? ... On my ibond 1099 I have “Interest on US Savings Bond and Treas Obligations (Ref. Box 3)” = $2,632 and “Federal Income Tax Withheld (Box 4)” = $579. I included the ibond interest in the total amount of "Federal taxable Income", IT-201 line 2. From the ibond 1099 form, do I put the Box #3 amount on IT-201 "New York Subtractions" Line 28 (“Interest income on US gov bonds”)? Yes. Do I need to put the Box #4 amount anywhere on the NYS IT-201? No. It should only appear in the Payments section of your federal 1040 form. Any other tips? Buy a tax preparation program. One mistake or omission when manually f...
by #Cruncher
Wed Mar 06, 2024 7:37 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 466526

Re: Trading Treasuries (nominal and TIPS)

I checked the TIPS yields today on the WSJ site. https://www.wsj.com/market-data/bonds/tips ... some (notably the 10/26, 4/27, 7/27 and 4/28 maturities) seemed to be affected disproportionately. Does anybody have a clue to why those specific bonds were affected more than the others? The yield change from Monday to Tuesday certainly does look strange for these four issues. 04/15/2026 0.125% 2.126% 2.070% -0.056% XXXXXXXXXXX| 07/15/2026 0.125% 1.932% 1.876% -0.056% XXXXXXXXXXX| 10/15/2026 0.125% 2.009% 1.794% -0.215% XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX| 01/15/2027 2.375% 1.976% 1.918% -0.058% XXXXXXXXXXXX| 01/15/2027 0.375% 2.080% 2.022% -0.058% XXXXXXXXXXXX| 04/15/2027 0.125% 2.106% 1.918% -0.188% XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX...
by #Cruncher
Wed Mar 06, 2024 6:58 am
Forum: Personal Investments
Topic: Vanguard Treasury redemption message vs actual redemption value
Replies: 5
Views: 858

Re: Vanguard Treasury redemption message vs actual redemption value

exodusNH wrote: Tue Mar 05, 2024 11:17 pm
noelb wrote: Tue Mar 05, 2024 10:01 pm... after redemption, the message says:
U S TREASURY BILL, cusip xxxx, in brokerage account yyyy, was redeemed on 2024-02-08. A quantity of 15,000 was redeemed at $98.66 for a total of $14,799.61. Why am I losing 200$ if I have held it to maturity?
Interest and principal are credited separately.
This bill was originally auctioned August 7, 2023 as a 26-week bill. But it looks like the noelb bought it as a 13-week bill at a re-opening auction November 6, 2023. The price at that November auction was 98.664069 making the cost equal to the amount Vanguard is reporting.
14,799.61 = 15000 * (98.664069 / 100)

So, according to exodusNH, Vanguard will report the $200.39 profit separately.
by #Cruncher
Tue Mar 05, 2024 8:58 pm
Forum: Investing - Theory, News & General
Topic: Buying Tbill vs notes
Replies: 3
Views: 816

Re: Buying Tbill vs notes

I've bought 6 month and 1year Bills recently and know the process using VG. If I now would prefer a note, is the process any different? Will I buy at a discount to face value as a Tbill or will I pay full face and accrue interest on that amount? We can see the difference if we compare the February auctions of the 52-week T-Bill and the 2-year T-Note . The bill was priced at 95.2528 with no coupon while the note was priced at 99.8754 with a 4-5/8% coupon. Rows 8:12 of the following table show their cash flows and row 13 their return as calculated with the Excel IRR function. [*] Row Col A Col B Col C Formula in Column B Copied to Column C 2 Face value 10,000 3 Issued Feb-2024 4 Type 52 Wk Bill 2 Yr Note 5 Mature Feb-2025 Feb-2026 6 Coupon 0...
by #Cruncher
Sun Mar 03, 2024 4:00 pm
Forum: Personal Investments
Topic: T-notes - secondary market, acrrued interest and taxes
Replies: 12
Views: 678

Re: T-notes - secondary market, acrrued interest and taxes

I am buying $33,000 worth (33 bonds @ 1000 par value) and the total cost is listed at $32793.63. I used Fidelity's Price/Yield calculator which says Accrued interest is $519.682 and this is added to the Total Cost. So, if I am understanding this process correctly: the $519.682 in accrued interest is owed to the seller (since they held the bond for most of the current period) and it's added to my cost. Correct. I will get the entirety of the next coupon payment of $598.13 on 3/30 since I am the current bond holder at that time[.] Correct except the interest payment date is 3/31, not 3/30. I will have to pay taxes on the entire coupon payment this year but in 2028 when it matures the taxable amount for the discount should be reduced by the a...
by #Cruncher
Sat Mar 02, 2024 12:09 am
Forum: Personal Finance (Not Investing)
Topic: NY State tax treatment of Accrued Market Discount for US Treasury Note
Replies: 76
Views: 6144

Re: NY State tax treatment of Accrued Market Discount for US Treasury Note

When average citizens can't possibly figure out what their tax obligation even is ... this clearly cannot be what the Founders or the Constitution intended. Indeed. The constitution didn't even allow an income tax until the sixteenth amendment in 1913. AMD does not come from the Treasury security or as a result of the obligation. The government is not a party to that gain, it is the result of private market pricing. It differs from interest which is paid by the US government to the holder of the bond, which all agree is state tax exempt. How would you treat a treasury bought from the gov't at a re-opened auction at a discount? I haven't found any answer to exodusing 's question so far in the thread. This is unfortunate since the issue is g...
by #Cruncher
Wed Feb 28, 2024 12:09 am
Forum: Investing - Theory, News & General
Topic: 30 yr TIPS = 2.2% real!
Replies: 26
Views: 4775

Re: 30 yr TIPS = 2.2% real!

As of today, the '52 has a duration of 27.29 years, and today's auction has a duration of 22.24 years ... For anyone interested, row 11 in the table below shows how these values can be calculated with the Excel DURATION function. Rows 16-77 drill down to show how Macaulay duration itself is calculated. Row Col A Col B Col C Col D Formula in Column C 2 Settlement 2/22/2024 3 Prev coupon date 2/15/2024 =COUPPCD(C2,C8,2,1) 4 Next coupon date 8/15/2024 =COUPNCD(C3,C8,2,1) 5 Days in period 182 =C4-C3 6 Days before settle 7 =C2-C3 7 Days after settle 175 =C4-C2 8 Maturity 2/15/2052 2/15/2054 9 Coupon 0.125% 2.125% 10 Yield to maturity 2.181% 2.200% 11 Macaulay duration 27.29 22.24 =DURATION($C2,C8,C9,C10,2,1) 12 Price 57.1084 98.3598 =PRICE($C2,...
by #Cruncher
Sun Feb 25, 2024 8:46 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 466526

Re: Trading Treasuries (nominal and TIPS)

... bond price is the present value of future cash flows discounted by the yield. ... we'll get a coupon payment each year discounted by 1/(1+y)^n. ... the price of the higher coupon bond must be higher because in addition to the final discounted principal payment, which is the same for both bonds, you receive more in coupon payments. We can see this with an illustration of three 5-year bonds each with a 10% yield-to-maturity. One bond has a 5% coupon and sells at a discount to the $1,000 face value. One has a 10% coupon equal to the yield and therefore sells for $1,000 -- equal to the face value. And the third one has a 15% coupon and sells at a premium. Face value 1,000 Years to maturity 5 Yield to maturity 10.0% Coupon-> 5.0% 10.0% 15.0...
by #Cruncher
Sun Feb 25, 2024 9:38 am
Forum: Personal Investments
Topic: Long TIPS ladder: buy in parts?
Replies: 10
Views: 1336

Re: Long TIPS ladder: buy in parts?

Option B ("sequential thirds"): use tipsladder.com to generate & buy Ladder1 for 2025-2034 ($40k/yr), costs $368k. Next spring (1Q 2025), when I have more funds, purchase Ladder2 for 2035-2044 ($40k/yr), costs X. Spring of 2026, purchase Ladder3 for 2045-2053 ($40k/yr), costs Y. I suggest reversing the order and buying the longer term TIPS first. Or, if you do buy the short term TIPS first, use the quantities computed when building a full 29-year ladder. The quantities computed for a 9 or 10 year ladder will be more than is needed. For example, here are the counts, costs, and proceeds each year 2025-2033 [*] of a ladder produced with my TIPS Ladder Builder Excel workbook. On the "Ladder" sheet I changed the "De...
by #Cruncher
Fri Feb 23, 2024 3:25 pm
Forum: Personal Finance (Not Investing)
Topic: Very Recent TIPS Fund Price Movement
Replies: 7
Views: 1015

Re: Very Recent TIPS Fund Price Movement

I bought VG intermediate TIPS fund on January 22nd ... I checked VG's price chart and noticed that the share price was $23.14 on February 1st and it was $22.69 yesterday. It seems to me that interest rates and inflation have been relatively flat over the past few weeks. Ignoring dividends, the share price of a bond fund moves in line with the prices of the bonds it holds. And the price of a bond varies inversely with the bond's yield-to-maturity. So, if the share price of a bond fund falls, it means the average yield of its holdings must have risen. Over the period you mention, this is indeed what happened with "intermediate TIPS funds"; i.e., those that hold TIPS maturing in more than one year -- what I call "1+" index...
by #Cruncher
Fri Feb 23, 2024 10:57 am
Forum: Personal Investments
Topic: understanding tips purchase using tipsladder and Fidelity
Replies: 6
Views: 989

Re: understanding tips purchase using tipsladder and Fidelity

... why (when looking at your table), the purchase cost of $12,416 exceeds my proceeds of $11,416? ... Perhaps the way to read it is that the cost indicated in a cell represents the purchase cost for just that year's set of bonds, while the total proceeds represent a summation of income from not only the tips that mature that year but also interest income from any tips that remain in the ladder? Your "Perhaps ..." reading is correct. The table you're referring to from my previous post shows the proceeds by year . -- Proceeds in Feb 21 2024 Dollars -- Nbr Final Coupons Total Year Bonds Cost Principal Coupon Oth Bonds Proceeds 2025 8.000 9,252 9,503 6 560 10,069 2026 8.000 8,961 9,360 6 548 9,915 2027 9.000 9,217 9,781 6 536 10,323...
by #Cruncher
Wed Feb 21, 2024 8:50 pm
Forum: Personal Investments
Topic: understanding tips purchase using tipsladder and Fidelity
Replies: 6
Views: 989

Re: understanding tips purchase using tipsladder and Fidelity

2) I expected the net purchase cost each year to be similar, but that is ony true for the first 3 years. Year #4 [2028] is significantly lower ... and year #5 [2029] significantly higher ... Why do they vary that much, ... There are two reasons why the bond tipsladder.com selects for 2029 costs more: It has a large 3-7/8% coupon. This produces substantial income in the years before 2029. One has to pay for that. Brokerages only sell TIPS in $1,000 face value increments. The 3-7/8% April 2029 was issued in 1999 and its initial 1.0 index ratio has grown to 1.86650 on 2/21/2024. This means that today it can only be purchased in $1,866.50 principal increments. My TIPS Ladder Builder Excel workbook has an option to build a ladder without roundi...
by #Cruncher
Wed Feb 21, 2024 11:42 am
Forum: Investing - Theory, News & General
Topic: 30-Year TIPS Auction Thursday 2/22/2024
Replies: 8
Views: 1943

30-Year TIPS Auction Thursday 2/22/2024

As shown in the auction announcement , a new 30-year TIPS will be auctioned tomorrow. Anyone wanting to participate needs to get his order in today or early tomorrow morning (exact time varies among brokers). It will mature 2/15/2054. Its yield-to-maturity will likely be close to that of the outstanding TIPS maturing one year earlier which Bloomberg United States Rates & Bonds currently shows at 2.18%. Since this is an initial auction, the unadjusted price will be equal to or slightly less than par. This post shows that the inflation-adjusted price plus accrued interest will almost certainly come in between 97 and 100. Edited 2/22/2024 2:00 PM to add auction results: As kalarama and mfFrom35k mention below, the auction yield came in at ...
by #Cruncher
Tue Feb 20, 2024 9:08 pm
Forum: Personal Investments
Topic: What is the final payout amount for this TIPS?
Replies: 6
Views: 862

Re: What is the final payout amount for this TIPS?

What is the formula to determine the final amount returned for this 2051 TIPS purchase from January? I do not need the TOTAL amount returned over the life of the bond (e.g. the coupons) just the real dollar principal amount returned in 2051. No formula is necessary. Just multiply the $35,000 face value by the bond's index ratio on the date you want to use for purchasing power. If you want purchasing power as of the 1/5/2024 settlement date, multiply by 1.18145 as qatman and Kevin M do in the posts above. If you want the purchasing power as of the bond's 2/15/2021 "Dated Date" just before it was first issued, multiply by 1.0 -- i.e., just use the $35,000 face value. Another [input] is payment amount, which is the annual coupon pay...
by #Cruncher
Mon Feb 19, 2024 1:05 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 466526

Re: Help me understand TIPS operationally...

... if I want to find a TIPS that behave similarly to an I-Bond, should I look for one that has the smallest coupon rate? In other words, will a 0% coupon rate TIPS work in the same way as an I-Bond, since it pays out no interest? When we buy a coupon bond, we're buying both the single principal redemption at maturity and the stream of coupon interest along the way. For example, for a $10,000 30-year bond with a 2% yield-to-maturity (YTM), we'd pay $5,521 for just the principal redemption. [*] This is shown on row 6 of the table below. But the total purchase price would include the present value of the coupon interest as well. Row 8 shows that this would vary from $280 for a 0-1/8% coupon bond to $6,719 for a bond with a 3% coupon. Row 9 s...
by #Cruncher
Sat Feb 17, 2024 11:03 am
Forum: Personal Investments
Topic: TIPS Ladders
Replies: 29
Views: 6213

Re: TIPS Ladders

In the "Yearly" tab [of my TIPS Ladder Builder Excel workbook], I would like to see coupon payments for 2024. These aren't shown because the first year in the tab is 2025. You can't see them on the "Yearly" sheet; but you can on the "XIRR" sheet. For example, they total 4,209 in constant 2/20/2024 dollars for the default ladder from the update I just published this morning. Most comes in 8/15/2024 from the TIPS maturing 2040-2054 which pay interest 2/15 and 8/15. Nbr Bonds 635 Cost 660,484 Total Princ 761,752 XIRR 2.139% Proceeds 904,608 2024 4,209 <=== 2025-2054 900,399 4/15/2024 176 7/15/2024 733 8/15/2024 3,124 <=== 10/15/2024 176
by #Cruncher
Thu Feb 15, 2024 8:30 pm
Forum: Personal Finance (Not Investing)
Topic: Reporting taxes for TIPS bonds in taxable account
Replies: 23
Views: 3304

Re: Reporting taxes for TIPS bonds in taxable account

Thank you ... for the explanation of my 1099-OID form I received from Treasury Direct! ... The form said $34.36 and I came up with $34.21 - not sure why. Hard as it is to believe, TreasuryDirect (like the IRS, part of the US Treasury) doesn't know how to calculate OID. It incorrectly uses December 31 instead of January 1 for the starting and ending index ratios (shown on this TD webpage ). Date Idx Ratio Per $1K Correct: Start 1/01/2023 1.05548 End 1/01/2024 1.08969 Increase 0.03421 -> $34.21 TreasuryDirect (incorrect): Start 12/31/2022 1.05535 End 12/31/2023 1.08971 Increase 0.03436 -> $34.36 The remaining mystery is how will this be handled in my taxes for the year 2027 when the TIPS matures. When I purchased it at auction there was a pr...
by #Cruncher
Thu Feb 15, 2024 7:08 am
Forum: Investing - Theory, News & General
Topic: Messy TIPS Ladder Tracking
Replies: 4
Views: 973

Re: Messy TIPS Ladder Tracking

Is there a spreadsheet where I could enter the CUSIPs and quantities and get a cash flow for each year that includes the newer purchases? My TIPS Ladder Builder Excel workbook may do what you wish. Besides determining what TIPS to buy for a ladder, it can calculate the cash inflows from specified holdings. To use it this way, blank out all the entries in the "Multiplier" column (N) on the "Ladder" sheet and enter the count of each bond you hold in the "Already Held" column (O). The "Yearly" sheet will then show the principal and interest proceeds each year. The latest update of the workbook shows these proceeds in terms of 2/5/2024 constant dollars. [1] The workbook can only show the constant dollar ...
by #Cruncher
Tue Feb 13, 2024 3:46 pm
Forum: Investing - Theory, News & General
Topic: Managing TIPS Phantom Income
Replies: 77
Views: 5704

Re: Managing TIPS Phantom Income

Except for small differences due to tax payment timing; discount, par, and premium TIPS with the same maturity and yield-to-maturity (YTM) will have the same after-tax return. ... Row Col A Col B Col C Col D Col E Col F Col G Col H Col I Col J Col K ... 19 Return 5.060% 5.060% 5.060% 4.058% 4.048% 4.042% ... Cells: I19:K19 show that all three TIPS also have about the same after tax return, 4.048%. ... ... my point was to compare the various TIPS per dollar invested . The return (specifically Internal Rate of Return) is unaffected by the size of the investment. It would be interesting to redo your spreadsheet holding the dollar amount invested constant. To demonstrate that the size of the investment doesn't affect the return, I've done as y...
by #Cruncher
Tue Feb 13, 2024 12:00 pm
Forum: Investing - Theory, News & General
Topic: Managing TIPS Phantom Income
Replies: 77
Views: 5704

Re: Managing TIPS Phantom Income

Except for small differences due to tax payment timing; discount, par, and premium TIPS with the same maturity and yield-to-maturity (YTM) will have the same after-tax return. To illustrate, here is a comparison of $10,000 principal value of three 20-year TIPS all with a 2% YTM. I assume all three TIPS are sold after five years with YTM still at 2% and that inflation runs at a constant 3% rate during the five years. Columns B, F, and I: hypothetical zero-coupon bought at a price of 67.297 and sold at 74.301. Columns C, G, and J: 2% coupon bought at 100 and sold at 100. Columns D, H, and K: 4% coupon bought at 132.703 and sold at 125.699. Row Col A Col B Col C Col D Col E Col F Col G Col H Col I Col J Col K 2 Principal 10,000 3 YTM 2.000% 4 ...
by #Cruncher
Sun Feb 11, 2024 10:54 am
Forum: Personal Finance (Not Investing)
Topic: How To Determine End Value And Time Frame Of An Interest Only Home Equity Line Of Credit
Replies: 2
Views: 328

Re: How To Determine End Value And Time Frame Of An Interest Only Home Equity Line Of Credit

I currently have a $205,000 Home Equity Line Of Credit at 5% per annum with the only requirement being that interest must be paid on a [monthly] basis on the outstanding balance with no principal necessary to be repaid until all funds have run out ... My intention is to pull, from the line of credit, $1000 per month plus whatever interest dollar amount I have accumulated the previous month on the overall [outstanding] balance ... at what point will the whole available balance become zero and how much will I have fully ... netted of the $205,000 ... and how much interest will I have paid? Trying to figure out how many months / years I can pull from the line of credit ... We can use the Excel NPER function to calculate how many months it wou...
by #Cruncher
Sun Feb 11, 2024 8:01 am
Forum: Personal Finance (Not Investing)
Topic: Individual TIPS vs TIPS Funds
Replies: 34
Views: 3263

Re: Individual TIPS vs TIPS Funds

... can you please add a scenario where there are no reinvestments (reinvestmented at zero percent perhaps?). I would like to see that to compare against your three scenarios. I can think of three cases to model this and calculate a Terminal Value Annual Return (TVAR). Coupons are reinvested at a 0% real rate. Coupons are reinvested at a 0% nominal rate. (This is equivalent to sticking them in a mattress and not actually reinvesting them.) But since we are analyzing TIPS with a real return, we have to make an inflation assumption and convert 0% nominal to a real rate. for instance if we were to assume 2% inflation, the real reinvestment rate is about -2% . The coupons are spent. But in this case, TVAR has little meaning. It would be better...
by #Cruncher
Fri Feb 09, 2024 12:23 pm
Forum: Personal Finance (Not Investing)
Topic: Individual TIPS vs TIPS Funds
Replies: 34
Views: 3263

Re: Individual TIPS vs TIPS Funds

... if I buy a TIPS with a two percent YTM, and hold it to maturity, I will have received two percent real ... Correct? Correct. You will receive two percent real on all the money you invested in the TIPS. This is correct if the vague phrase, "will receive ...", refers to yield-to-maturity (YTM). YTM doesn't depend on how or even if coupons are reinvested. But if it refers to what I call Terminal Value Annual Return (TVAR) [1], it isn't necessarily correct. To illustrate, here is a comparison of two bonds both with a YTM of 2%. One has a 0-1/8% coupon and matures in 28 years while the other has a 1-1/2% coupon and matures a year later. [2] Row 9 in the table below [3] shows that if coupons are reinvested at 2%, the same as the YT...
by #Cruncher
Thu Feb 08, 2024 9:38 am
Forum: Investing - Theory, News & General
Topic: Is this a sensible way to compare two Treasury bonds?
Replies: 12
Views: 2141

Re: Is this a sensible way to compare two Treasury bonds?

In your comparison of what would happen if I sold each bond, you assume the bond prices have fallen. I would be very interested in how you compare them if their prices have risen, ... The table below shows the return for both bonds if they are sold after one year with various assumptions for the yield on 19-year bonds at that time: from 0% all the way up to 9.5%. For example, if the YTM was 3.5% after one year, the 3-3/4% coupon bond would gain 18.76% while the 4-3/4% coupon bond would gain only 18.05%. [*] For two bonds with the same term to maturity, the one with the smaller coupon will have a longer duration. This means it will be more sensitive to changes in yields. If yields go down, its price will rise more. If they go up, its price ...
by #Cruncher
Wed Feb 07, 2024 7:52 am
Forum: Investing - Theory, News & General
Topic: Is this a sensible way to compare two Treasury bonds?
Replies: 12
Views: 2141

Re: Is this a sensible way to compare two Treasury bonds?

A more apples to apples comparison is to assume an equal purchase amount of each bond, $62,400 for bond 1 and bond 2, not equal amounts of face value. Indeed. $62,400 would purchase $63,030 face value of the bond selling at a discount with the higher yield-to-maturity (YTM). (62,400 = 63,030 * 0.99) I show this option in column D of the table below. As shown on rows 10 and 33 it produces $1,182 more profit than the premium bond in column C. (Rows 5 and 34 use the RATE and IRR functions to calculate the YTM. For simplicity I'm assuming interest is paid annually.) Row Col A Col B Col C Col D Formula in Col B Copied Right 2 Term 20 3 Coupon 4.375% 4.750% 4.375% 4 Price 99 104 99 5 YTM 4.452% 4.444% 4.452% =RATE($B2,100*B3,-B4,100,0) 6 Face va...
by #Cruncher
Tue Feb 06, 2024 11:29 am
Forum: Investing - Theory, News & General
Topic: New tool for building a TIPS ladder
Replies: 426
Views: 81334

Re: New tool for building a TIPS ladder

[L]ook at the detailed table in the tips ladder result. If you were to buy only the first year, it would generate $2329 of interest ... If you only bought the first year you would get $19,447 back in principal and $2329 in interest, or $21,766 total not $31,542[.] You're misreading the detail table, Raspberry. $2,329 is the interest from all five TIPS collected in 2028. The entire interest from 2024 to 2028 of the TIPS maturing April 2028 is only $1,094 as shown in cell B11 below. Therefore, if one only bought that TIPS, the total proceeds would be $20,540 (in Feb 2024 dollars) as shown in cells B12, B19, and B24. Row Col A Col B Col C Col D Col E Col F Col G Formula in Column B 2 Settlement 2/07/2024 Total 3 Maturity 4/15/2028 4/15/2029 1...
by #Cruncher
Mon Feb 05, 2024 6:54 am
Forum: Personal Investments
Topic: Interest on Treasury Note
Replies: 5
Views: 911

Re: Interest on Treasury Note

3. I see an interest payment made on 01/31/2024 for $112.5. Is the real interest $5.5 (12 days since I held the bold) and the $107 is 'refunded' as part of interest? As shown in the table below, interest accrues to the Monday 1/22/2024 settlement date, not to the Friday 1/19/2024 trade date. Therefore, your net $5.50 interest (112.50 - 107.00) equals nine days of interest, not twelve: 5.50 = 9000 * (2.5% / 2) * (9 / 184) Row Col A Col B Formulas in Column B 2 Face value 9,000 3 Settlement 1/22/2024 4 Matures 1/31/2025 5 Coupon 2.500% 6 Price 97.77 7 Previous interest date 7/31/2023 8 Next interest date 1/31/2024 9 Days in period 184 =B8-B7 10 Days before settlement 175 =B3-B7 11 Cost of principal 8,799.30 =B2*(B6/100) 12 Accrued interest 1...
by #Cruncher
Sun Feb 04, 2024 4:14 pm
Forum: Investing - Theory, News & General
Topic: TIPS Ladder Spreadsheets in General & Two in Particular
Replies: 166
Views: 47854

Re: TIPS Ladder Spreadsheets in General & Two in Particular

Kevin M wrote: Sat Feb 03, 2024 1:49 pm... the XIRR sheet ... assumes a maximum of 30 TIPS, so if you have more than that, it doesn't include them all. ... I have 37 different TIPS in the ladder sheet ...
I've expanded the workbook's XIRR and ToPaste sheets to handle up to 50 selected TIPS.
by #Cruncher
Sun Feb 04, 2024 11:53 am
Forum: Investing - Theory, News & General
Topic: Treasury Note prices on secondary market
Replies: 10
Views: 1067

Re: Treasury Note prices on secondary market

Say I buy a current 3 year Treasury Note yielding 4.1%. Say 3 year rates rise to 5% in the next year and I need to sell some bonds. Is there a predictable way to tell in 12 months, with a rise from 4.1% to 5% in the 3 year rate, what the price on the secondary market would be? As IDpilot and jeffyscott point out in the two previous posts, it's the yield of notes with two, not three , years to maturity that counts. Given an assumption for that, we can use the Excel PRICE function to determine the note's price. We can also do this to confirm the price calculated for a Treasury auction as well as determining what its price would be in the future. For example, cell B6 in the table below shows the price determined by the auction of the 4% 3-yea...
by #Cruncher
Fri Feb 02, 2024 5:21 pm
Forum: Investing - Theory, News & General
Topic: TIPS Ladder Spreadsheets in General & Two in Particular
Replies: 166
Views: 47854

Re: TIPS Ladder Spreadsheets in General & Two in Particular

Say I want to get about the same real income in Jan and Jul of a year. If I enter 0.5 for each into the multiplier column, the quantity Needed and Principal are much larger for Jan than for Jul. I've modified the "Ladder" sheet of the workbook to solve this. When more than one TIPS is chosen for a single maturity year, the interest on TIPS maturing in later years is split amongst them in proportion to their "Multiplier" values. It looks like you can enter the same date for settlement and base dates and same ref CPI for that date. (The date of the WSJ quotes?) "Settlement date of WSJ Quotes" and "Ref CPI on Settlement Date" (cells K1 and K2 on the "Ladder" sheet) are used to compute the cost...
by #Cruncher
Thu Feb 01, 2024 3:23 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4186
Views: 466526

Re: Trading Treasuries (nominal and TIPS)

... one of my TIPS has a very high accrued principal, and I don't understand what it means. CUSIP 91282CGW5 Maturity 4/15/2028 Accrued principal 1,898 You mixing up two TIPS that both mature April 15, 2028, Tom. CUSIP 91282CGW5 is the 1-1/4% coupon 5-year . Its index ratio on Feb 1st is only 1.02368. CUSIP 912810FD5 is the 3-5/8% coupon 30-year . It's the one with a 1.89842 index ratio on Feb 1st. Well, now I'm really confused because I didn't pay much more than that. I'm looking at my historical Fido transaction for this bond. Purchase date: 9/21/2023 Quantity: 50 Price: 95.461 Accrued interest: 278.30 Total amount: 48,894.65 This purchase is of the 1-1/4% 5-year TIPS. Row Col A Col B Formula in Column B 2 Face value purchased 50,000 3 In...
by #Cruncher
Wed Jan 31, 2024 7:55 pm
Forum: Personal Finance (Not Investing)
Topic: When to start non-COLA pension?
Replies: 17
Views: 1917

Re: When to start non-COLA pension?

If the value of the payments increases each year at a rate greater than inflation, I would tend to wait. However, I would verify that by calculating the net present value of the income stream using some assumption about longevity ... A non-CPI-Indexed pension must increase well above inflation to justify delaying. As Jovby points out in the quote below, this pension increases 6-6.5% per year by delaying seven years to age 65. This is well above expected inflation. But as my table further below shows, the present values of the survival-weighted benefits are less when starting at 65 than at 58. The annuity appears to grow at about 6-6.5% from age 58 to 65, and the cost for 100% survivor is about 10%. Both very reasonable numbers. I don’t thi...
by #Cruncher
Tue Jan 30, 2024 11:17 am
Forum: Personal Investments
Topic: T-Bill indicative yield vs. discount rate — difference larger than expected
Replies: 8
Views: 1036

Re: T-Bill indicative yield vs. discount rate — difference larger than expected

How is the discount rate defined? ... Discount rate on a Treasury Bill is ((100-price)/100)*(360/term) [where] term is measured in days The formula is correct, but the discount rate is determined first [1] and then used to determine the price. The formula for this is shown on row 8 of the table [2] below. The price is then used to determine the investment rate (aka bond equivalent or coupon equivalent rate) as shown on row 9. Row Col A Col B Col C Formula in Column B Copied Right to Column C 2 Issued 1/25/2024 1/25/2024 3 Matures 7/25/2024 1/23/2025 4 High discount rate 5.020% 4.570% 5 Days in term 182 364 =B3-B2 6 Days in year 366 366 =DATE(YEAR(B2)+1,MONTH(B2),DAY(B2))-B2 7 Fraction of year 91/183 182/183 =B5/B6 8 Price 97.462111 95.3792...
by #Cruncher
Thu Jan 25, 2024 9:12 pm
Forum: Personal Investments
Topic: Bond price and YTM
Replies: 4
Views: 714

Re: Bond price and YTM

[The two bonds] do have different coupons. ... They have the same YTM. They have different prices. ... Lower price bond would leave money to buy more bonds ... With the lower price bond you can indeed buy more face value , but you're not buying much more cash flow. And the small additional cash flow you do get, is delayed until maturity. This can be seen in the following comparison of $10,000 invested in two hypothetical 5-year bonds that both have a 4% yield-to-maturity (YTM). I set the coupon rates to 1.958% and 6.496% so the lower price bond would have a face value of $11,000 and the higher priced bond only $9,000. Row Col A Col B Col C Formula in Col B Copied Right 2 Investment 10,000 3 YTM 4.000% 4 Years 5 5 Coupon 1.958% 6.496% 6 Pri...