Search found 15580 matches

by Kevin M
Mon Mar 18, 2024 2:55 pm
Forum: Investing - Theory, News & General
Topic: Taxation of Treasury bills, notes and bonds
Replies: 1028
Views: 149503

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: 2937
Views: 611735

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: 11143

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: 355

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: 1028
Views: 149503

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: 1028
Views: 149503

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: 9
Views: 1205

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: 5
Views: 799

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: 9
Views: 1205

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: 4107
Views: 455608

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: 1028
Views: 149503

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: 4107
Views: 455608

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: 4107
Views: 455608

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: 2468

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: 4107
Views: 455608

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...
by Kevin M
Wed Mar 13, 2024 8:50 am
Forum: Investing - Theory, News & General
Topic: Now that long TIPS yields are 60 bp off their highs I will…
Replies: 2937
Views: 611735

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

If you don’t use tips are you deciding no fixed income and going 100% stocks to better keep up with inflation? Or are you using tbills or savings accounts/cds? If you are going to have some fixed income, tips seem like the better deal than total bond but I’m interested in other ideas. For now just individual t-bills in taxable and money market in tax advantage account. What makes you think these will do any better than TIPS at keeping up with inflation? The expected return of Tbills and money market funds is about the same as TIPS, but the uncertainty of those returns is much larger over longer periods due to reinvestment risk. So not only are you no more likely to keep up with inflation, but the risk of you not doing so is much higher. As...
by Kevin M
Tue Mar 12, 2024 5:41 pm
Forum: Personal Investments
Topic: Newbie for Bonds
Replies: 30
Views: 2468

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
Tue Mar 12, 2024 2:00 pm
Forum: Investing - Theory, News & General
Topic: April and July 2024 TIPS
Replies: 40
Views: 5691

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. I use a calculation similar to the one shown by #Cruncher in the previous post to calculate the value at maturity, including the final coupon. I use values for one bond, but I'll show the values to 3 decimal places to validate against #Cruncher's numbers. The Principal + coupon for 1 bond at maturity, inflation adjusted, is 1,229.466. Note that this is consistent with #Cruncher's final cash flow of 12,294.66 for quantity 10. I use the same calculation method to determine the value for a purchase today. A purchase today, 3/12/2024, settles tomorrow, 3/13/2024, so we use the index rat...
by Kevin M
Tue Mar 12, 2024 1:38 pm
Forum: Personal Investments
Topic: Newbie for Bonds
Replies: 30
Views: 2468

Re: Newbie for Bonds

I buy Treasury bonds almost daily. Lots of TIPS, which I highly recommend, especially for retirement, but also lots of short-term Treasuries. I buy mostly on the secondary market, because I can buy what I want when I want, and the trading costs are minimal compared to no trading costs at auctions. Schwab is the best for retail investors, because they often, if not usually, have the best price for minimum quantity 1 ($1,000 face value). Fidelity usually has a higher price (lower yield) for quantities less than 100, although they've been offering best prices for min qty 40 on some TIPS lately. Since you have a Schwab account, I recommend you do any secondary market purchases there. It doesn't matter for auctions, as everyone gets the same pri...
by Kevin M
Tue Mar 12, 2024 12:24 pm
Forum: Investing - Theory, News & General
Topic: April and July 2024 TIPS
Replies: 40
Views: 5691

Re: April and July 2024 TIPS

Today # Cruncher posted this relevant tidbit in another thread : <snip> 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 date. As shown on this webpage , and cell D28 of the table below, we therefore know a purchase at the initial auction will have a 4.636% nominal return if held to maturity. <snip Row Col A Col B Col C Col D Formula in Column B 2 Face value 10,000 3 Settlement 4/30/2019 4 Maturity 4/15/2024 5 Coupon 0.500% 6 Price 99.9266 7 Yield to maturity 0.515% =YIELD(B3,B4,B5,B6,100,2,1) 8 Pre...
by Kevin M
Tue Mar 12, 2024 9:48 am
Forum: Personal Investments
Topic: Treasury Bonds
Replies: 4
Views: 821

Re: Treasury Bonds

Is there any general rule? We are considering a purchase of 5 - 10 year treasury bonds, is it better to hold them in a IRA or a taxable account? We will begin drawdown on our retirement accounts within the next year or so. Of our total portfolio, we currently have about 75% in IRA accounts and the other 25% in taxable. Holdings in the IRA accounts will be basic Bogle. Well, if by "basic Bogle", you mean a 2-fund or 3-fund portfolio, adding individual Treasuries won't be basic Bogle, but so what? I would strongly recommend that you consider TIPS instead of nominal Treasuries. As a retiree one of the greatest risks to your wealth is unexpected inflation, and TIPS are the best type of security to mitigate that risk. Currently TIPS y...
by Kevin M
Tue Mar 12, 2024 9:40 am
Forum: Personal Investments
Topic: T bills interests at Treasury Direct
Replies: 6
Views: 840

Re: T bills interests at Treasury Direct

I don't use TD, but I keep "spare change" in a money market fund. If I subsequently buy more Treasuries, and I'm a little short, I'll sell some of the MM fund to cover the deficit. If I buy a T bill of $5k , interest $50. Treasury direct take $4500 on purchase of the T bill. Where do I keep the other $50 dollars for coumpounding? 5,000 - 50 = 4,950, not 4,500. In Treasury Direct, you can opt to have interest transferred to your bank account or go into your C of I. In Fidelity, I’m not sure. I have auto roll on both so I assumed it rolls over principal and accrued interest. C of I pays no interest, last I checked, so not a good solution. Gotta get it out of TD to earn any interest. You can only buy Treasuries in increments of $1,00...
by Kevin M
Tue Mar 12, 2024 9:31 am
Forum: Investing - Theory, News & General
Topic: Minimum TIPS lot size at Fidelity?
Replies: 15
Views: 1685

Re: Minimum TIPS lot size at Fidelity?

dust wrote: Tue Mar 12, 2024 9:18 am Both yesterday and today, at Fidelity during market hours, I've tried and failed to buy 912810TY4 in quantities under 50, 912810SG4 under 40, 91282CDX6 under 5, and 9128283R9 under 5. 912810TY4 makes sense as it was issued very recently, but the rest are disappointing. I wish Fidelity would let us place new offers, rather than just take existing ones.
I see the same thing. All available at Schwab at min qty 1 (best price to boot). Transfer your account?
by Kevin M
Mon Mar 11, 2024 9:31 am
Forum: Investing - Theory, News & General
Topic: Can we expect TBM funds to outperform inflation?
Replies: 62
Views: 5113

Re: Can we expect TBM funds to outperform inflation?

you should consider how much the tax deferral is worth when the real rate on I bonds is only 1.3%, compared to an average of 2% for TIPS of what duration? That's about the average yield for all TIPS. I just downloaded TIPS quotes from Schwab, and the average if the seasonally-adjusted ask yields for all TIPS except the Apr 2024 is 2.06%; I exclude Apr 2024 because it's real yield (-1.8%) has little meaning, given that there are only 2 weeks of unknown inflation adjustments left for it. Even July 2024 at -0.05% ask seems to be trading more like a nominal Treasury at this point. Here is the chart of TIPS ask yields: https://i.postimg.cc/qRQt1v87/image.png Hopefully folks can see from the sawtooth ask yield curve why the seasonal adjustments ...
by Kevin M
Sun Mar 10, 2024 6:07 pm
Forum: Investing - Theory, News & General
Topic: Can we expect TBM funds to outperform inflation?
Replies: 62
Views: 5113

Re: Can we expect TBM funds to outperform inflation?

The yield on the 4/15/2025 TIPS was 2.3% on Friday, and that's 2.5% when adjusted for seasonality (I know, I know--complicated; you can ignore the seasonality thing, and the yield still is much higher than I bonds). So you will earn 2.3% real in a year, with no penalty, and you can sell at a small cost before that if you want. So buy some short-term TIPS for true liquidity, keep your I bonds for semi-liquidity, and buy longer-term TIPS for your longer-term goals. Oh wow! So, I more or less need to educate myself about short-term tips, right? And these are individual TIPS, not funds? (And also figure out how to account for cash flowing taxes on phantom income) Correct on all counts. Do you reinvest the dividends from your stock funds? I wou...
by Kevin M
Sun Mar 10, 2024 5:58 pm
Forum: Investing - Theory, News & General
Topic: Taxation of Treasury bills, notes and bonds
Replies: 1028
Views: 149503

Re: How to report gain/loss and interest for Tbills sold before maturity

Thank you Kevin M. Unfortunately, my case is different from your case because all the gain from selling T-bill before maturity appears in 1099-INT. None appears in 1099-B. Instead of being able to enter the correct interest amount in 1099-INT interview, we will have to enter the wrong amount and make an adjustment to it. What broker is this? I would like to see the entire composite 1099 to see if there is something you might be missing. Assuming you are telling the whole truth and nothing but the truth, I would just leave it as is, and report the interest on 1099-INT. Your broker made it simple for you, so why complicate things? The IRS will get the 1099-INT, and it will match what you report on your return, so the IRS will be happy. Any d...
by Kevin M
Sun Mar 10, 2024 5:35 pm
Forum: Investing - Theory, News & General
Topic: Can we expect TBM funds to outperform inflation?
Replies: 62
Views: 5113

Re: Can we expect TBM funds to outperform inflation?

Ummmm... personal failings? At some point, preference DOES become about emotions, idiosyncracies, and feeling like I still need to educate myself more about how TIPS funds have behaved in the market. Seeing the number of people who jumped into nominal bond funds who hadn't educated themselves fully first, I am loathe to rush this point. Also, part of it may have to do with excitement for I Bonds, not just in their simplicity, but also their other properties like liquidity (where all of a sudden short term principal protection DOES start to matter despite my usually-long-term perspective) and expanding my tax-advantaged space. You aren't expanding your tax advantaged space, you are buying a specific type of security for which the tax can be...
by Kevin M
Sun Mar 10, 2024 5:17 pm
Forum: Investing - Theory, News & General
Topic: Taxation of Treasury bills, notes and bonds
Replies: 1028
Views: 149503

Re: How to report gain/loss and interest for Tbills sold before maturity

Thank you Kevin M. Unfortunately, my case is different from your case because all the gain from selling T-bill before maturity appears in 1099-INT. None appears in 1099-B. Instead of being able to enter the correct interest amount in 1099-INT interview, we will have to enter the wrong amount and make an adjustment to it. What broker is this? I would like to see the entire composite 1099 to see if there is something you might be missing. Assuming you are telling the whole truth and nothing but the truth, I would just leave it as is, and report the interest on 1099-INT. Your broker made it simple for you, so why complicate things? The IRS will get the 1099-INT, and it will match what you report on your return, so the IRS will be happy. Any d...
by Kevin M
Sun Mar 10, 2024 4:55 pm
Forum: Investing - Theory, News & General
Topic: Taxation of Treasury bills, notes and bonds
Replies: 1028
Views: 149503

How to report gain/loss and interest for Tbills sold before maturity

if i need to add adjustment in Schedule B, what should I put in line 1? "Accrued Interest Adjustment"? Will IRS understand this part of interest income is re-characterized as capital gain? I went back to my 2019 return, since I sold a bunch of Treasuries, including bills, before maturity. I used HRB, and I'll use my Schwab 1099 as an example. I've discussed this several times in this thread, but I might not have gone into the details. Schwab reported the "gains" in a section with this title and instruction: Short-Term Realized Gain or (Loss) The transactions in this section are not reported on Form 1099-B or to the IRS . Report on Form 8949, in either Part I with Box C checked or Part II with Box F checked, as appropria...
by Kevin M
Sun Mar 10, 2024 9:55 am
Forum: Investing - Theory, News & General
Topic: Can we expect TBM funds to outperform inflation?
Replies: 62
Views: 5113

Re: Can we expect TBM funds to outperform inflation?

nisiprius wrote: Sat Mar 09, 2024 3:26 pm From the average returns of stocks, bonds, and Treasury bills (i.e. "cash"), over the full time period 1900-2021, have all kept up with inflation. Source: Credit Suisse Global Investment Returns Yearbook, 2022 summary edition. As you see, bonds had a real return--i.e. beat inflation--by 2% per year.

Those are long-term bonds.
Right. This is why long-term TIPS are a good deal now: the real yield is about 2%, so why take the risk of unexpected inflation with nominal bonds when you can get the long-term average real yield with TIPS without that risk?
by Kevin M
Sun Mar 10, 2024 9:52 am
Forum: Investing - Theory, News & General
Topic: Can we expect TBM funds to outperform inflation?
Replies: 62
Views: 5113

Re: Can we expect TBM funds to outperform inflation?

tibbitts wrote: Sat Mar 09, 2024 8:55 pm
avalpert1 wrote: Sat Mar 09, 2024 6:08 pm
tibbitts wrote: Sat Mar 09, 2024 4:33 pm Of course nominal bonds come with the risk of falling short.
They also have the potential to provide a higher real return if inflation is lower than the market believes today.
Presumably on average nominal bonds should outperform TIPS by the amount of the inflation insurance premium.
There is no such thing.

There are two widely accepted premia when it comes to TIPS vs. nominal Treasuries: Nominal Treasuries have an unexpected inflation yield premium, and TIPS have a liquidity yield premium. These premia work in opposite directions in terms of breakeven inflation (nominal yield minus TIPS yield), and are unobservable, so my first-order approximation is that they cancel out.
by Kevin M
Sat Mar 09, 2024 10:46 am
Forum: Investing - Theory, News & General
Topic: Taxation of Treasury bills, notes and bonds
Replies: 1028
Views: 149503

Re: Report Gain from Selling T-Bill as Interest Income?

It seems that treating all gains as ordinary income is not consistent with IRS rules. Treating the difference between the purchase price and the sale price as ordinary income is consisting with IRS rules when the purchase price was lower than the sale price and the difference is not more than the ratable share of the acquisition discount. If the difference is more than the ratable share, then the excess over the ratable share is a capital gain. Right. This has been discussed a length in this thread, and resolved definitively, so it's kind of unfortunate to see all the thrashing about regarding it in the thread that was merged into this thread. You can search this thread for "accrued acquisition discount" to see the discussions ab...
by Kevin M
Sat Mar 09, 2024 10:34 am
Forum: Investing - Theory, News & General
Topic: Taxation of Treasury bills, notes and bonds
Replies: 1028
Views: 149503

Re: Taxation of Treasury bills, notes and bonds

I purchased 3 Treasury bonds on the secondary market in my taxable account in 2023 as follows: 1) Maturity: 7/31/2024 No interest received in 2023 Accrued interest paid in 2023: $80.84 2) Maturity: 2/29/2024 Interest received in 2023: $427.50 Accrued interest paid in 2023: $6.97 3) Maturity: 5/15/2024 Interest received in 2023: $93.75 Accrued interest paid in 2023: $42.80 The accrued interest is shown on my form 1099 as not reported to the IRS. My question is do I need to reflect the accrued interest in my 2023 return, or does this form part of the interest/capital gain on my 2024 return when these bonds mature? Thanks in advance! This has been discussed at length. Since your total interest is greater than the accrued interest paid, I woul...
by Kevin M
Sat Mar 09, 2024 10:21 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455608

Re: Trading Treasuries (nominal and TIPS)

In various post, there are comments that Schwab has the best price for low quality. 1 is a low quantity, but how high is still considered how quantity? Just look at the depth of book at Fidelity or Vanguard; whatever minimum quantity has the best price is "large quantity". Typically it's 100, but could be more or less. Fidelity has best prices for min quantity 40 for some TIPS, which seems to be their version of special pricing, similar to Schwab offering special pricing for min qty 1. Another question if have is if there are time of the year where it is better to invest in TIPS? I have attempted to read through the seasonal articles listed in another post, but I think I don't have enough background knowledge to understand it. No...
by Kevin M
Fri Mar 08, 2024 12:14 pm
Forum: Investing - Theory, News & General
Topic: Minimum TIPS lot size at Fidelity?
Replies: 15
Views: 1685

Re: Minimum TIPS lot size at Fidelity?

In the past few years, I have been able to purchase TIPS on the secondary market at Fidelity in lot sizes as small as 1. In case you're wondering, sometimes I have a bit of extra cash on hand and a TIPS ladder rung that could use topping up. That purchase strategy of buying 1-5 bonds every month or so might be costing you in the long run. As an exercise, try getting quotes for 1-5 bonds and then 50 bonds and finally 100-200 bonds. If you do this quickly, so that the market changes little while you're checking, you will see that the price per bond of a tiny order is much higher than the larger orders. You may be better served by building cash in a money market at 5%+ for several months and then making a larger order of TIPS. Same goes for s...
by Kevin M
Fri Mar 08, 2024 9:56 am
Forum: Investing - Theory, News & General
Topic: Minimum TIPS lot size at Fidelity?
Replies: 15
Views: 1685

Re: Minimum TIPS lot size at Fidelity?

I just checked about five TIPS at random at Fido, and saw min qty 1 for all of them.

Which TIPS are you looking at?
by Kevin M
Fri Mar 08, 2024 9:48 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455608

Re: Trading Treasuries (nominal and TIPS)

Worth it to open an account at Schwab vs Fidelity for TIPS? It seems they have best prices for smaller quantities Id be buying but not sure if additional account/complexity worth it. Thought id get input from those that have done both. Schwab absolutely has the best prices for small quantities--usually with best price for min qty 1, and if not, the min qty 1 price usually is a only a few tenths of a basis point higher than the best price. It was worth it to me, but for family members who have no interest in carefully managing their accounts, and whose accounts I manage, I decided to consolidate everything at Fidelity. A big reason was Fidelity's superior cash management solutions; e.g., they can leave $10-20K in "checking", and e...
by Kevin M
Thu Mar 07, 2024 10:27 am
Forum: Personal Finance (Not Investing)
Topic: (H&R Block Desktop) Vanguard Treasury/Federal Money Market and State Taxes
Replies: 15
Views: 1170

Re: (H&R Block Desktop) Vanguard Treasury/Federal Money Market and State Taxes

I followed the process that I did because I like to be precise as much as possible. My two money market funds have the following US obligations percentages: Federal Money Market Fund - 49.97% Treasury Money Market Fund - 80.06% Could I have just summarized into one total and arbitrarily selected one or the other % above? Certainly. And it would not have made a significant difference. No, that would not be even close to correct. You need to use the % USGO for each fund. The way I'd do it is multiply the dividends of each of these funds by the % USGO, and divide the sum of the result by the total dividends, using that as the percentage USGO to enter in HRB using one 1099-INT. I do it this way, except for my state, CA, Fed MM did not meet the...
by Kevin M
Thu Mar 07, 2024 10:13 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455608

Re: Trading Treasuries (nominal and TIPS)

I still need some more 2046 and 2047 for my ladder. My average 2046 yield is 2.045%, and when I checked earlier the ask yield was 2.07%, so that looked OK. But now it's down to 2.03% :oops: Now 2.02% On a related note, I usually don't check, and I don't really trust the quotes used, but I was a bit shocked by the gain Schwab shows for my IRA, which is all TIPS. Today I bought the rest of what I needed for my ladder of the 2046 at 2.051%, increasing my dollar weighted average yield to 2.046%. I also bought a few more 2047s at 2.051%, which is the highest yield I've gotten for this one. My average yield is 2.015%. These were bought with proceeds of selling some of my Jul 2024s at 100.0391 (more than I'll get at maturity, and the coupon is on...
by Kevin M
Thu Mar 07, 2024 9:36 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455608

Re: Trading Treasuries (nominal and TIPS)

Can anyone please explain the difference between "daily treasury bill rates" and "daily treasury par yield curve rates"? Why the difference in the quotes for them for the same maturity (1-3 months) in treasury.gov? Daily Treasury Bill Rates Date / 4 WEEKS BANK DISCOUNT / COUPON EQUIVALENT / 8 WEEKS BANK DISCOUNT / COUPON EQUIVALENT / 13 WEEKS BANK DISCOUNT / COUPON EQUIVALENT 03/06/2024 / 5.27 / 5.36 / 5.27 / 5.39 / 5.24 / 5.38 https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_bill_rates&field_tdr_date_value_month=202403 Daily Treasury Par Yield Curve Rates Date / 1mo / 2mo / 3mo 03/06/2024 / 5.50 / 5.47 / 5.47 https://home.treasury.gov/resource-center/data-chart...
by Kevin M
Wed Mar 06, 2024 2:25 pm
Forum: Investing - Theory, News & General
Topic: Taxation of Treasury bills, notes and bonds
Replies: 1028
Views: 149503

Re: Taxation of Treasury bills, notes and bonds

Here's what I do if there's both accrued interest and amortized bond premium for a 1099-INT; I'll use a Vanguard 1099-INT as an example. As a reminder, you can only do one adjustment per 1099-INT in HRB, so it requires two 1099-INTs to do this. In the Detail for Interest Income, Vanguard provides this summary: 10,763.23 Total Interest -869.08 Total Accrued interest paid -2,062.64 Total Bd premium- covered lots I enter it into a spreadsheet this way: Vanguard Interest Bond premium Accrued interest 1099-INT original 10,763 2,063 1099-INT for acc int 1,000 869 1099-INT for ABP 9,763 2,063 Data row 1 shows the entries on the 1099-INT as downloaded from Vanguard. The interest is in Box 3, since it's all UST interest. Row 2 shows what I enter on ...
by Kevin M
Wed Mar 06, 2024 2:05 pm
Forum: Investing - Theory, News & General
Topic: Taxation of Treasury bills, notes and bonds
Replies: 1028
Views: 149503

Re: Taxation of Treasury bills, notes and bonds

I think I mentioned that the Vanguard 1099 download downloads a form 1099-OID form for each TIPS. Although it's simple to just click through each one, it's faster to delete them all except one (one click per delete) and enter the total OID in the one remaining form. I've done it both ways, and I prefer the second way.

Fidelity downloads the total OID into one form--makes much more sense.
by Kevin M
Wed Mar 06, 2024 11:01 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455608

Re: Trading Treasuries (nominal and TIPS)

I still need some more 2046 and 2047 for my ladder. My average 2046 yield is 2.045%, and when I checked earlier the ask yield was 2.07%, so that looked OK. But now it's down to 2.03% :oops: Now 2.02%

On a related note, I usually don't check, and I don't really trust the quotes used, but I was a bit shocked by the gain Schwab shows for my IRA, which is all TIPS.
by Kevin M
Wed Mar 06, 2024 10:38 am
Forum: Investing - Theory, News & General
Topic: Help me understand which T-bill to buy
Replies: 12
Views: 1377

Re: Help me understand which T-bill to buy

I disagree with the others about buying at auction. I prefer secondary market because I can buy what I want when I want, and the trading costs for Treasuries are so small that the auction doesn't provide any big advantage; the change in yields between now and the next 26w auction are likely to be much larger than the bid/ask spread or large/small-quantity spread, if there is one.

You just missed the most recent 26w auction, which was on Monday. The next auction is next Monday, March 11, and settlement for that isn't until Thursday March 14. If you buy on secondary today, settlement is tomorrow, March 7. So you lose a week by waiting for the auction.
by Kevin M
Wed Mar 06, 2024 10:31 am
Forum: Investing - Theory, News & General
Topic: Help me understand which T-bill to buy
Replies: 12
Views: 1377

Re: Help me understand which T-bill to buy

The image shows a list of available 6-month Treasuries for purchase. Some have a "coupon" varying from 0 to 3.25% If you have $5,000. available for purchase - which would you choose and why? https://www.familybynet.net/images_other/treasuries.jpg Normally I prefer no coupon or low coupon, since this minimizes or eliminates coupon reinvestment risk, but only one of these will even pay a coupon before maturity--the 9/15 will pay interest on 3/15, but it's a small coupon, so I wouldn't worry about that. Other than that, I'd pick the one with the highest yield. That would be the 8/31 3.250% note at 5.317. The 9/5 bill at 5.309 is less than a basis point lower, and would be slightly easier to handle on an income tax return, so if in t...
by Kevin M
Wed Mar 06, 2024 9:45 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455608

Re: Trading Treasuries (nominal and TIPS)

I checked the TIPS yields today on the WSJ site. https://www.wsj.com/market-data/bonds/tips They took quite a beating, but 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? I suspect not, but if there is a reason I am curious. I love how "took quite a beating" means TIPS prices went up across the board. Yields took a beating, not prices (as I worded above). But those particular bonds went up (in price) disproportionately compared with others with very close maturities. I was just curious why. There is probably no simple explanation. You're right of course, I just found the choice of words amusi...
by Kevin M
Wed Mar 06, 2024 9:24 am
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455608

Re: Trading Treasuries (nominal and TIPS)

protagonist wrote: Tue Mar 05, 2024 6:49 pm I checked the TIPS yields today on the WSJ site. https://www.wsj.com/market-data/bonds/tips
They took quite a beating, but 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?
I suspect not, but if there is a reason I am curious.
The yield curve in this range looks typical of late to me, adjusted for seasonality of course:

Image

This is based on ask quotes from Fido just now.
by Kevin M
Tue Mar 05, 2024 1:39 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455608

Re: Trading Treasuries (nominal and TIPS)

I had a Treasury mature on Feb. 27 and funds were available Feb. 28 so I purchased the Jan 2034 TIPS (CUSIP: 91282C-JY-8) the morning of the 28th on the secondary market. Yield to maturity was 1.953%. On Feb. 15 when I bought the same the ytm was 1.925%. I'm wondering what the result of the re-opening auction for that 10 TIPS on March 21 will be. Also wondering what the rate on 3 year auction on Thursday March 7 will look like. St. Louis Fed constant maturity on Friday was 4.32% for the 3 year. The 3y auction is not on March 7, it's tentatively scheduled for March 11. The announcement is on March 7. Source: Tentative Auction Schedule of U.S. Treasury Securities . A guesstimate for the yield at this auction probably is a bit more reliable t...
by Kevin M
Mon Mar 04, 2024 3:01 pm
Forum: Personal Investments
Topic: Treasury Bonds as a substitute for a portion of the overall bond fund allocation?
Replies: 2
Views: 488

Re: Treasury Bonds as a substitute for a portion of the overall bond fund allocation?

Rather than think of it as a "bond fund " allocation, just think of it as a bond or fixed income allocation. Individual Treasuries comprise a part of that allocation, as do bond funds. I have almost all of my fixed income in Treasuries, but I'm not going out more than about two years with nominal Treasuries; I use TIPS for longer-term fixed income, since I don't want to take on much unexpected inflation risk. You know, unexpected inflation like we had in 2021 and 2022? So I would say that you could put 100% of your bond allocation into Treasuries, but I wouldn't limit myself to 5-10 years or nominal bonds. What I, and many others, have done or are in the process of doing, is to build a TIPS ladder to cover our residual expenses. I...
by Kevin M
Mon Mar 04, 2024 1:21 pm
Forum: Investing - Theory, News & General
Topic: Trading Treasuries (nominal and TIPS)
Replies: 4107
Views: 455608

Re: Trading Treasuries (nominal and TIPS)

silvergga wrote: Mon Mar 04, 2024 12:37 pm Update for those who are interested. Auction closed on Mar 4 morning, and settlement date is Mar 7. Interestingly, Vanguard already shows a negative balance right now at 1:35pm EST (Mar 4). The negative balance amount is also at the auction price (~$98.64) - so I know exactly how much VUSXX I need to sell before Mar 6 market close to settle on Mar 7.

I hope they are not charging me margin interest from now till Mar 7. Should they?
Nope. Margin interest only applies after settlement.