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Posted: **Mon Feb 11, 2019 1:52 pm**

I am interested in moving about 1/3 of my fixed income into Pimco long term TIPS (LTPZ). I will keep about a 1/3 in short term treasuries and 1/3 in total bond market.

According to Pimco’s website the yield to maturity is 3.22%. This seems almost too good to be true to get this return for over 20 years with inflation protection, no credit risk, and only term risk. Here are the details: http://www.pimcoetfs.com/Funds/Pages/PI ... l=fund_nav

BlackRock’s iShares long treasury (TLT) has a yield to maturity of 2.95%: https://www.ishares.com/us/products/239 ... y-bond-etf

I have some questions:

1. My understanding is yield to maturity is the total payments you will receive divided by the cost to purchase if you hold to maturity. Is this correct?

2. There are some liquidity and spread issues with LTPZ. Am I underestimating these in relation to TLT? It seems inflation protect of a 20-year+ period would greatly outweigh these. Am I missing something?

3. LTPZ only holds nine securities. My tax advantaged space is 80% Roth IRAs, so I like to hold equities in these accounts. I would need to hold a substantial portion of my fixed income in a regular account. Can I do this by just buying long TIPS from Treasury Direct or is the ETF more tax efficient?

Thanks,

Posted: **Mon Feb 11, 2019 2:11 pm**

LTPZ is reporting the SEC yield with inflation adjustments included. The real yield after expenses would be about .9%.

It does trade with larger spreads than TLT, but it is not a major concern for a buy and hold investment.

You can just buy an individual LT TIPS issue from a brokerage account. Be aware that the inflation adjustments make the tax accounting more complex if you go this route. This would be equally tax efficient vs the ETF.

As a simpler approach, I would propose skipping the separate long term and short term funds and instead go for a total TIPS fund for inflation bonds and total bond for nominal, split 50/50. That would produce very close to the same result with less cost and complexity

Posted: **Mon Feb 11, 2019 3:10 pm**

FMRP wrote: ↑
Mon Feb 11, 2019 1:52 pm
I am interested in moving about 1/3 of my fixed income into Pimco long term TIPS (LTPZ). I will keep about a 1/3 in short term treasuries and 1/3 in total bond market.

According to Pimco’s website the yield to maturity is 3.22%. This seems almost too good to be true to get this return for over 20 years with inflation protection, no credit risk, and only term risk. Here are the details: http://www.pimcoetfs.com/Funds/Pages/PI ... l=fund_nav

BlackRock’s iShares long treasury (TLT) has a yield to maturity of 2.95%: https://www.ishares.com/us/products/239 ... y-bond-etf

I have some questions:

1. My understanding is yield to maturity is the total payments you will receive divided by the cost to purchase if you hold to maturity. Is this correct?

2. There are some liquidity and spread issues with LTPZ. Am I underestimating these in relation to TLT? It seems inflation protect of a 20-year+ period would greatly outweigh these. Am I missing something?

3. LTPZ only holds nine securities. My tax advantaged space is 80% Roth IRAs, so I like to hold equities in these accounts. I would need to hold a substantial portion of my fixed income in a regular account. Can I do this by just buying long TIPS from Treasury Direct or is the ETF more tax efficient?

Thanks,

While it depends on your tax situation, the general advice is not keep tax advantaged assets in tax advantaged space. Equities are tax advantaged, TIPS are not. Have you had a chance to consider that?
But assuming you go ahead as planned, I agree with the comment about the TIPS accounting for the IRS being a PIA. As much as I would like to avoid the .2% management fee of LTPZ, it's not worth the accounting hassle for TIPS, where you have to mess with OID, bond premium/discount on the 1099s. Lots of people do it, but I found it tricky.

Posted: **Mon Feb 11, 2019 5:26 pm**

Thanks for the replies. Very helpful.

I checked out iShares TIP: https://www.ishares.com/us/products/239 ... s-bond-etf

It shows a “Real Yield” of 0.77, but no “Yield to Maturity.”

The SEC Yield for LTPZ and TIP are -2.92% and -3.06% respectively.

LTPZ does not show a “Real Yield.”

Is there a reliable source for real yields of inflation linked securities on the Internet?

Posted: **Mon Feb 11, 2019 7:05 pm**

FMRP wrote: ↑
Mon Feb 11, 2019 5:26 pm
Is there a reliable source for real yields of inflation linked securities on the Internet?

https://www.bloomberg.com/markets/rates ... t-bonds/us

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Pimco long term TIPS (LTPZ) yield to maturity

Pimco long term TIPS (LTPZ) yield to maturity

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Re: Pimco long term TIPS (LTPZ) yield to maturity

Re: Pimco long term TIPS (LTPZ) yield to maturity