That doesn't really answer the question of the precise rules by which the dividend payout is calculated.The Fund is subject to income fluctuations. The Fund’s quarterly income distributions are likely to fluctuate considerably more than the income distributions of a typical bond fund. Income fluctuations associated with changes in interest rates are expected to be low; however, income fluctuations associated with changes in inflation are expected to be high. Overall, investors can expect income fluctuations to be high for the Fund.
Where do you see that this fund has been "negative", Nisi? When I go to Search for more historical price information on the Vanguard Short-Term Bond Index Fund Investor Shares (VBISX) Price & Performance tab, it shows the SEC yield has been positive throughout 2013.nisiprius wrote:I say "Well, short-term bond index has been negative, too, but it has made distributions."
Besides the coupon, bond premium amortization needs to be considered. For example assume that on 1/2/2013 Vanguard bought $100 face value of the 1.25% April 2014 TIPS when the yield was -1.262% (see WSJ TIPS Quotes 1/2/2013). The price corresponding to this yield is 103.25%. * Vanguard's accountants will amortize this $3.25 premium over the remaining life of the bond.nisiprius wrote:what is distributed is the combination of the coupon interest payments and the inflation adjustment in the principal
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103.25 Price @ -1.262 yield 1/2/2013 *
102.00 Price @ -1.262 yield 7/1/2013 *
(1.25) Amortization of premium
0.62 Coupon for 1/2 year
(0.63) Interest Income
I am not going to bother to check details, maybe someone else knows them off the top of their head, it's enough for me to know that "the dividend payout rules for TIPS funds are weird because the inflation adjustment numbers factor into it in some way." That seems illogical since you have no access to the inflation adjustments until the bond matures.