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Short-Term TIPS distribution?

Posted: Fri Jun 28, 2013 11:43 am
by archbish99
I'm a little confused here, and hoping someone has already figured out what's going on. If not, next stop is a call to Vanguard to clarify.

On Vanguard's list of funds declaring a dividend in June, the Short-Term TIPS Index is listed. However, on the Short-Term TIPS Index fund's distribution page, it doesn't show a distribution since December. Is it in error that it's included in the list, or in error that there's nothing listed on the fund-specific page? Nothing has shown up in the account, either, for what it's worth.

Or is it simply making a zero-amount distribution, and neither page is wrong but also not quite complete? But in that case I would have expected a note similar to the regular TIPS fund, saying that there was no net income to distribute (negative inflation adjustments ate the coupon payments).

Re: Short-Term TIPS distribution?

Posted: Fri Jun 28, 2013 7:54 pm
by #Cruncher
I suspect that there was nothing to declare. But if so, I'm surprised that Vanguard doesn't say so, and leaves shareholders to speculate. However, if indeed there is nothing to declare, it's the reverse of "negative inflation adjustments ate the coupon payments". There was a small increase in the CPI over the first 6 months of the year (see Ref CPI for 2013), so the inflation adjustment was positive. But the interest income * net of fund expenses was probably negative to a greater extent. This can be roughly estimated by using the -1.44% SEC yield on 1/2/2013 from the Price history search page.

Code: Select all

  231.31700  Ref CPI 01/01/2013
  232.53100  Ref CPI 07/01/2013
    0.52%    increase in inflation-adjusted principal
   -0.72%    SEC yield 01/02/2013 of -1.44% divided by 2
   -0.20%    real yield less expenses plus inflation adjustment
* Interest income reflects not just the coupon payments, but also the amortization of bond premium. If a fund buys a bond priced above par, it amortizes the premium over the remaining life. Since all short-term TIPS currently have negative real yields, this means that they are priced above par to the extent that the amortization exceeds the coupon payments. This results in a negative interest income.

Re: Short-Term TIPS distribution?

Posted: Sat Jun 29, 2013 5:14 pm
by archbish99
Thanks, that makes sense.... I'm still surprised they haven't posted anything, though.