TreasuryDirect scammed me? :-)

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Topic Author
m@ver1ck
Posts: 324
Joined: Fri Sep 14, 2018 2:18 pm

TreasuryDirect scammed me? :-)

Post by m@ver1ck » Sat Aug 01, 2020 11:19 am

I clearly didn't know what I was doing, so bought $500 worth of TIPS on TreasuryDirect.

Here are the details:
Security Type: 10-Year TIPS
Par Amount: $500.00
Inflation-Adjusted Value: Not available
Price per $100: 111.032606
Investment/Interest Rate: 0.125%

10 year - maturing in 2030.
Issue Date: 07-31-2020
Maturity Date: 07-15-2030

Strangely enough, they charged me $555 for the pleasure of holding my $500 for 10 years.

Is that Negative interest rates in action?

Lesson: I should have just invested $25 for the learning experience instead of $500.

Anyone care to explain what's going on?
Last edited by m@ver1ck on Sat Aug 01, 2020 11:29 am, edited 1 time in total.

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vineviz
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Re: TreasuryDirect scammed me? :-)

Post by vineviz » Sat Aug 01, 2020 11:28 am

m@ver1ck wrote:
Sat Aug 01, 2020 11:19 am
I clearly didn't know what I was doing, so bought $500 worth of TIPS on TreasuryDirect.

Here are the details:
Security Type: 10-Year TIPS
Par Amount: $500.00
Inflation-Adjusted Value: Not available
Price per $100: 111.032606
Investment/Interest Rate: 0.125%

10 year - maturing in 2030.
Issue Date: 07-31-2020
Maturity Date: 07-15-2030

Strangely enough, they charged me $555 for the pleasure of holding my money for 10 years.

Is that Negative interest rates in action?

Lesson: I should have just invested $25 for the learning experience instead of $500.

Anyone care to explain what's going on?
You bought five bonds at $111 each.

They will be worth AT LEAST $111100 in 2030: more if inflation is greater than 0%. You will receive a coupon payment of at least $0.35 every six months: more if inflation is greater than 0%.
Last edited by vineviz on Sat Aug 01, 2020 1:46 pm, edited 1 time in total.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

Topic Author
m@ver1ck
Posts: 324
Joined: Fri Sep 14, 2018 2:18 pm

Re: TreasuryDirect scammed me? :-)

Post by m@ver1ck » Sat Aug 01, 2020 11:33 am

Ah - so I get paid .125% Per Annum (better than Ally checking!!) :-), and this protects me against Hyper-Inflation, since it'll be inflation adjusted.

Not a bad deal, I guess, If I had to shore up a few 100 million.

ikowik
Posts: 165
Joined: Tue Dec 23, 2014 6:52 pm

Re: TreasuryDirect scammed me? :-)

Post by ikowik » Sat Aug 01, 2020 12:38 pm

vineviz wrote:
Sat Aug 01, 2020 11:28 am
m@ver1ck wrote:
Sat Aug 01, 2020 11:19 am
I clearly didn't know what I was doing, so bought $500 worth of TIPS on TreasuryDirect.

Here are the details:
Security Type: 10-Year TIPS
Par Amount: $500.00
Inflation-Adjusted Value: Not available
Price per $100: 111.032606
Investment/Interest Rate: 0.125%

10 year - maturing in 2030.
Issue Date: 07-31-2020
Maturity Date: 07-15-2030

Strangely enough, they charged me $555 for the pleasure of holding my money for 10 years.

Is that Negative interest rates in action?

Lesson: I should have just invested $25 for the learning experience instead of $500.

Anyone care to explain what's going on?
You bought five bonds at $111 each.

They will be worth AT LEAST $111 in 2030: more if inflation is greater than 0%. You will receive a coupon payment of at least $0.35 every six months: more if inflation is greater than 0%.
I do not understand this. The interest rate is set at 0.125%. So with no inflation, coupon payment for each $100 of TIPS would be $0.125. Over 10 years that comes to $1.25 in interest (or a small amount more if interest is compounded, I am not sure if it is). That does not equal the $111 paid. I though that with zero inflation over 10 years, the guaranteed amount at term is still only $100 (the face value), not what was paid in auction.

Chip
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Re: TreasuryDirect scammed me? :-)

Post by Chip » Sat Aug 01, 2020 12:39 pm

vineviz wrote:
Sat Aug 01, 2020 11:28 am
You bought five bonds at $111 each.

They will be worth AT LEAST $111 in 2030: more if inflation is greater than 0%. You will receive a coupon payment of at least $0.35 every six months: more if inflation is greater than 0%.
Are you sure about this? I believe those bonds will pay out $100 at maturity, plus inflation adjustments. Not $111.

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vineviz
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Re: TreasuryDirect scammed me? :-)

Post by vineviz » Sat Aug 01, 2020 12:46 pm

Chip wrote:
Sat Aug 01, 2020 12:39 pm
vineviz wrote:
Sat Aug 01, 2020 11:28 am
You bought five bonds at $111 each.

They will be worth AT LEAST $111 in 2030: more if inflation is greater than 0%. You will receive a coupon payment of at least $0.35 every six months: more if inflation is greater than 0%.
Are you sure about this? I believe those bonds will pay out $100 at maturity, plus inflation adjustments. Not $111.
At maturity, TIPS pay back the inflation-adjusted principal or original principal, whichever is greater.

If they’d been originally issued at $100 but purchased for $111 in the secondary market, there’d be some downside risk from deflation. Purchased at auction, though, there’s no risk of principal loss.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

TravelGeek
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Re: TreasuryDirect scammed me? :-)

Post by TravelGeek » Sat Aug 01, 2020 12:57 pm

m@ver1ck wrote:
Sat Aug 01, 2020 11:19 am

Lesson: I should have just invested $25 for the learning experience instead of $500.
Or $7.95 for fellow Boglehead tfb's book "Explore TIPS"

https://thefinancebuff.com/explore-tips

(disclaimer: I bought the book a while ago, but haven't had the opportunity to finish it, but what I read so far was very helpful and easy to follow)

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FIREchief
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Re: TreasuryDirect scammed me? :-)

Post by FIREchief » Sat Aug 01, 2020 1:00 pm

vineviz wrote:
Sat Aug 01, 2020 11:28 am
You bought five bonds at $111 each.

They will be worth AT LEAST $111 in 2030: more if inflation is greater than 0%. You will receive a coupon payment of at least $0.35 every six months: more if inflation is greater than 0%.
If inflation is zero (or less), won't the OP just get back $100 in 2030? The other $11 is mostly the premium to pre-pay the difference between the -1% auction yield and the actual .125% coupon payments.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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Steve Reading
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Re: TreasuryDirect scammed me? :-)

Post by Steve Reading » Sat Aug 01, 2020 1:06 pm

vineviz wrote:
Sat Aug 01, 2020 11:28 am
You bought five bonds at $111 each.

They will be worth AT LEAST $111 in 2030
No I don't think that's right. At maturity, and with 0% inflation, the TIPs will pay back the original principal. Which is the par value times the index ratio at the date of the purchase (1.00531 based on https://www.treasurydirect.gov/instit/a ... =912828ZZ6). I don't think it's just par value as others have said (although they're so close, I don't think it matters).

So at least 100*5*1.00531 = $502. That's the "original principal".

Now the TIPs sold at higher than that ($555 in all) because TIPs prices are determined at auction based on prevailing yields. The 10Y TIP OP bought has a coupon of 0.125% but current 10Y TIPs offer have about -1% yields. So the TIPs prices at the auction are increased accordingly over the original principal to give a similar yield-to-maturity. This table under "Terms and Prices" explains how the price of the TIP is moved accordingly at auction:
https://www.treasurydirect.gov/indiv/re ... _rates.htm

That's my understanding any ways.
"... so high a present discounted value of wealth, it is only prudent for him to put more into common stocks compared to his present tangible wealth, borrowing if necessary" - Paul Samuelson

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Steve Reading
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Re: TreasuryDirect scammed me? :-)

Post by Steve Reading » Sat Aug 01, 2020 1:11 pm

m@ver1ck wrote:
Sat Aug 01, 2020 11:19 am
I clearly didn't know what I was doing, so bought $500 worth of TIPS on TreasuryDirect.

Here are the details:
Security Type: 10-Year TIPS
Par Amount: $500.00
Inflation-Adjusted Value: Not available
Price per $100: 111.032606
Investment/Interest Rate: 0.125%

10 year - maturing in 2030.
Issue Date: 07-31-2020
Maturity Date: 07-15-2030

Strangely enough, they charged me $555 for the pleasure of holding my $500 for 10 years.

Is that Negative interest rates in action?

Lesson: I should have just invested $25 for the learning experience instead of $500.

Anyone care to explain what's going on?
I don't think it's a scam. You bought bonds with a 0.125% coupon, at $555 when the payment at maturity should be basically $500 given 0% inflation. Which is a yield-to-maturity of -0.9%. Which makes sense since that's the current YTM of 10-Year TIPs.

However, that's with 0% inflation. If inflation is higher, you make more. Say 2% inflation, then overall a YTM of 2%-0.9% = +1.1%. And should inflation be lower, you're capped basically at -0.9%.

What are I bonds offering? I think those might have been a better deal right now.
"... so high a present discounted value of wealth, it is only prudent for him to put more into common stocks compared to his present tangible wealth, borrowing if necessary" - Paul Samuelson

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vineviz
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Re: TreasuryDirect scammed me? :-)

Post by vineviz » Sat Aug 01, 2020 1:17 pm

Steve Reading wrote:
Sat Aug 01, 2020 1:06 pm


So at least 100*5*1.00531 = $502. That's the "original principal".
That is the right calculation for the current “adjusted principal”, and it’s the notional principal that would be used to calculate the coupon payment.

But at maturity you get at least the “original principal”, which is the $111. It’s basically an embedded put option: not very valuable, because inflation is almost always positive, but consequently not very expensive.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Steve Reading
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Re: TreasuryDirect scammed me? :-)

Post by Steve Reading » Sat Aug 01, 2020 1:24 pm

vineviz wrote:
Sat Aug 01, 2020 1:17 pm
Steve Reading wrote:
Sat Aug 01, 2020 1:06 pm


So at least 100*5*1.00531 = $502. That's the "original principal".
That is the right calculation for the current “adjusted principal”, and it’s the notional principal that would be used to calculate the coupon payment.

But at maturity you get at least the “original principal”, which is the $111. It’s basically an embedded put option: not very valuable, because inflation is almost always positive, but consequently not very expensive.
So from this article:
https://tipswatch.com/why-tips/

If I buy via Treasury Direct and pay more than par or 100, say $107.06 for a coupon rate of 0.125% to result in a negative yield, then is the 7.06 premium ‘protected’ if a chronic deflation sets in? In other words, at maturity will the Treasury reimburse principal of 100, or of 107.06?

When you pay $107.06 for a TIPS at auction, you are paying up to receive that 0.125% coupon rate. After ten years, you get back $100, plus any inflation adjustment to principal. So you are paying $107 for $100, simple as that. If we suffered through chronic deflation for 10 years, you’d get back $100.

You're saying the above is wrong?
"... so high a present discounted value of wealth, it is only prudent for him to put more into common stocks compared to his present tangible wealth, borrowing if necessary" - Paul Samuelson

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vineviz
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Re: TreasuryDirect scammed me? :-)

Post by vineviz » Sat Aug 01, 2020 1:28 pm

Steve Reading wrote:
Sat Aug 01, 2020 1:24 pm
vineviz wrote:
Sat Aug 01, 2020 1:17 pm
Steve Reading wrote:
Sat Aug 01, 2020 1:06 pm


So at least 100*5*1.00531 = $502. That's the "original principal".
That is the right calculation for the current “adjusted principal”, and it’s the notional principal that would be used to calculate the coupon payment.

But at maturity you get at least the “original principal”, which is the $111. It’s basically an embedded put option: not very valuable, because inflation is almost always positive, but consequently not very expensive.
So from this article:
https://tipswatch.com/why-tips/

If I buy via Treasury Direct and pay more than par or 100, say $107.06 for a coupon rate of 0.125% to result in a negative yield, then is the 7.06 premium ‘protected’ if a chronic deflation sets in? In other words, at maturity will the Treasury reimburse principal of 100, or of 107.06?

When you pay $107.06 for a TIPS at auction, you are paying up to receive that 0.125% coupon rate. After ten years, you get back $100, plus any inflation adjustment to principal. So you are paying $107 for $100, simple as that. If we suffered through chronic deflation for 10 years, you’d get back $100.

You're saying the above is wrong?
I think it is.

Nope. I was wrong.
Last edited by vineviz on Sat Aug 01, 2020 1:45 pm, edited 1 time in total.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

luckyducky99
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Re: TreasuryDirect scammed me? :-)

Post by luckyducky99 » Sat Aug 01, 2020 1:34 pm

vineviz wrote:
Sat Aug 01, 2020 1:28 pm
Steve Reading wrote:
Sat Aug 01, 2020 1:24 pm
vineviz wrote:
Sat Aug 01, 2020 1:17 pm
Steve Reading wrote:
Sat Aug 01, 2020 1:06 pm


So at least 100*5*1.00531 = $502. That's the "original principal".
That is the right calculation for the current “adjusted principal”, and it’s the notional principal that would be used to calculate the coupon payment.

But at maturity you get at least the “original principal”, which is the $111. It’s basically an embedded put option: not very valuable, because inflation is almost always positive, but consequently not very expensive.
So from this article:
https://tipswatch.com/why-tips/

If I buy via Treasury Direct and pay more than par or 100, say $107.06 for a coupon rate of 0.125% to result in a negative yield, then is the 7.06 premium ‘protected’ if a chronic deflation sets in? In other words, at maturity will the Treasury reimburse principal of 100, or of 107.06?

When you pay $107.06 for a TIPS at auction, you are paying up to receive that 0.125% coupon rate. After ten years, you get back $100, plus any inflation adjustment to principal. So you are paying $107 for $100, simple as that. If we suffered through chronic deflation for 10 years, you’d get back $100.

You're saying the above is wrong?
I think it is.
But wouldn't that mean TIPS's real yield is always positive if bought at auction and held to maturity? You always get back what you paid, plus any inflation, plus some coupons along the way. I thought the thing everyone's making a big deal about right now is that real yields are negative?

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Steve Reading
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Re: TreasuryDirect scammed me? :-)

Post by Steve Reading » Sat Aug 01, 2020 1:42 pm

vineviz wrote:
Sat Aug 01, 2020 1:28 pm
Steve Reading wrote:
Sat Aug 01, 2020 1:24 pm
vineviz wrote:
Sat Aug 01, 2020 1:17 pm
Steve Reading wrote:
Sat Aug 01, 2020 1:06 pm


So at least 100*5*1.00531 = $502. That's the "original principal".
That is the right calculation for the current “adjusted principal”, and it’s the notional principal that would be used to calculate the coupon payment.

But at maturity you get at least the “original principal”, which is the $111. It’s basically an embedded put option: not very valuable, because inflation is almost always positive, but consequently not very expensive.
So from this article:
https://tipswatch.com/why-tips/

If I buy via Treasury Direct and pay more than par or 100, say $107.06 for a coupon rate of 0.125% to result in a negative yield, then is the 7.06 premium ‘protected’ if a chronic deflation sets in? In other words, at maturity will the Treasury reimburse principal of 100, or of 107.06?

When you pay $107.06 for a TIPS at auction, you are paying up to receive that 0.125% coupon rate. After ten years, you get back $100, plus any inflation adjustment to principal. So you are paying $107 for $100, simple as that. If we suffered through chronic deflation for 10 years, you’d get back $100.

You're saying the above is wrong?
I think it is.
What about this one https://www.bis.org/publ/qtrpdf/r_qt1012v.htm

Footnote 6:
This is by construction. The US Treasury will repay the higher of par and the inflation-adjusted principal at maturity.


Also wrong?
"... so high a present discounted value of wealth, it is only prudent for him to put more into common stocks compared to his present tangible wealth, borrowing if necessary" - Paul Samuelson

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vineviz
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Re: TreasuryDirect scammed me? :-)

Post by vineviz » Sat Aug 01, 2020 1:43 pm

vineviz wrote:
Sat Aug 01, 2020 1:28 pm
Steve Reading wrote:
Sat Aug 01, 2020 1:24 pm
vineviz wrote:
Sat Aug 01, 2020 1:17 pm
Steve Reading wrote:
Sat Aug 01, 2020 1:06 pm


So at least 100*5*1.00531 = $502. That's the "original principal".
That is the right calculation for the current “adjusted principal”, and it’s the notional principal that would be used to calculate the coupon payment.

But at maturity you get at least the “original principal”, which is the $111. It’s basically an embedded put option: not very valuable, because inflation is almost always positive, but consequently not very expensive.
So from this article:
https://tipswatch.com/why-tips/

If I buy via Treasury Direct and pay more than par or 100, say $107.06 for a coupon rate of 0.125% to result in a negative yield, then is the 7.06 premium ‘protected’ if a chronic deflation sets in? In other words, at maturity will the Treasury reimburse principal of 100, or of 107.06?

When you pay $107.06 for a TIPS at auction, you are paying up to receive that 0.125% coupon rate. After ten years, you get back $100, plus any inflation adjustment to principal. So you are paying $107 for $100, simple as that. If we suffered through chronic deflation for 10 years, you’d get back $100.

You're saying the above is wrong?
I think it is.
Strike what I said: I went back and looked at the Treasury regulations, and as you’d expect they use more precise language than the Treasury website (which I foolishly was relying on).
(iii) Are redeemed at maturity at their inflation-adjusted principal, or at their par amount, whichever is greater;
https://treasuryhunt.gov/lawguide/lawgu ... 021004.pdf

Clearly I was wrong, and the guarantee is “at least par value”.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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emlowe
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Re: TreasuryDirect scammed me? :-)

Post by emlowe » Sat Aug 01, 2020 1:45 pm


What are I bonds offering? I think those might have been a better deal right now.
If you bought I-Bonds today (anytime from today until Oct 2020), the fixed rate is 0% and the composite rate is 1.06% for 6 months after issue. The inflation rate of 1.06 (annualized) was set in May as a result of the change in CPI from Nov 2019 to Mar 2020.

It would not be surprising to see the inflation rate get reset to 0 in October

You always purchase I-Bonds at par and you will always get at least that par back at redemption.
Last edited by emlowe on Sat Aug 01, 2020 3:24 pm, edited 1 time in total.
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Expro
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Re: TreasuryDirect scammed me? :-)

Post by Expro » Sat Aug 01, 2020 3:23 pm

Hooboy, I thought I knew TIPS but after reading this thread, I am super confused. :shock:

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emlowe
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Re: TreasuryDirect scammed me? :-)

Post by emlowe » Sat Aug 01, 2020 3:27 pm

Actually the I-Bond inflation rate will likely be very negative when reset in October - however, the composite rate can never go below 0
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Topic Author
m@ver1ck
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Re: TreasuryDirect scammed me? :-)

Post by m@ver1ck » Sun Aug 02, 2020 7:44 pm

So - if I buy a bond fund - (not sure if vbtlx has TIPS) - am I getting similarly scammed? In the sense that I’ll get back 100 for every 111 I invest + inflation and .125%?
Seems not a great time to buy bonds that contain tips or treasuries.
Better off investing in CDs and corporate bonds - assuming no hyperinflation.

Northern Flicker
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Re: TreasuryDirect scammed me? :-)

Post by Northern Flicker » Sun Aug 02, 2020 7:55 pm

1. VBTLX does not hold TIPS.
2. You are not being scammed.
3. If you buy a CD on the secondary market at a price that is above par, you will only get back par at maturity.

All you've done is to buy up the interest rate you are getting. I think this can have tax consequences with respect to what income you receive is taxed as ordinary income, and what is taxed as a capital gain. But factoring in tge purchase above par, you are getting the market real yield for a 10-year TIPS, which currently is negative.
Risk is not a guarantor of return.

jason2459
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Re: TreasuryDirect scammed me? :-)

Post by jason2459 » Sun Aug 02, 2020 9:48 pm

vineviz wrote:
Sat Aug 01, 2020 1:43 pm
vineviz wrote:
Sat Aug 01, 2020 1:28 pm
Steve Reading wrote:
Sat Aug 01, 2020 1:24 pm
vineviz wrote:
Sat Aug 01, 2020 1:17 pm
Steve Reading wrote:
Sat Aug 01, 2020 1:06 pm


So at least 100*5*1.00531 = $502. That's the "original principal".
That is the right calculation for the current “adjusted principal”, and it’s the notional principal that would be used to calculate the coupon payment.

But at maturity you get at least the “original principal”, which is the $111. It’s basically an embedded put option: not very valuable, because inflation is almost always positive, but consequently not very expensive.
So from this article:
https://tipswatch.com/why-tips/

If I buy via Treasury Direct and pay more than par or 100, say $107.06 for a coupon rate of 0.125% to result in a negative yield, then is the 7.06 premium ‘protected’ if a chronic deflation sets in? In other words, at maturity will the Treasury reimburse principal of 100, or of 107.06?

When you pay $107.06 for a TIPS at auction, you are paying up to receive that 0.125% coupon rate. After ten years, you get back $100, plus any inflation adjustment to principal. So you are paying $107 for $100, simple as that. If we suffered through chronic deflation for 10 years, you’d get back $100.

You're saying the above is wrong?
I think it is.
Strike what I said: I went back and looked at the Treasury regulations, and as you’d expect they use more precise language than the Treasury website (which I foolishly was relying on).
(iii) Are redeemed at maturity at their inflation-adjusted principal, or at their par amount, whichever is greater;
https://treasuryhunt.gov/lawguide/lawgu ... 021004.pdf

Clearly I was wrong, and the guarantee is “at least par value”.
That is interesting. Treasury Direct needs to be way more clear about that up front on the page everyone actually reads. They even specify the return of principle is a protection from deflation. So, they should say mostly but not entirely protected from deflation in a negative yield environment. Learned something new. Thanks Steve for pointing that out.

ikowik
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Re: TreasuryDirect scammed me? :-)

Post by ikowik » Mon Aug 03, 2020 6:49 am

Northern Flicker wrote:
Sun Aug 02, 2020 7:55 pm
1. VBTLX does not hold TIPS.
2. You are not being scammed.
3. If you buy a CD on the secondary market at a price that is above par, you will only get back par at maturity.

All you've done is to buy up the interest rate you are getting. I think this can have tax consequences with respect to what income you receive is taxed as ordinary income, and what is taxed as a capital gain. But factoring in tge purchase above par, you are getting the market real yield for a 10-year TIPS, which currently is negative.
I feel the bolded part is not entirely correct. The interest bought over 10 years on $100 TIPS with a coupon of 0.125% equals $1.25 total over the 10 years (of course, any extra payments for inflation would be on top of this). If there is no inflation over 10 years, OP would get $100 (to be exact 100.53 as Steve Reading pointed out above) + $1.25- this is less than $111 paid at auction. The extra $9.2 is gone, it is a premium paid for the certainty of getting at least $101.78 after 10 years + protection for unexpected inflation.

vsquid
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Re: TreasuryDirect scammed me? :-)

Post by vsquid » Mon Aug 03, 2020 7:17 am

This is how negative interest rates work in practice. You are paying more than the face value to lock in a loss in real terms. Coupon and inflation adjustment don’t change this fact. They just make the math more complicated.

Some people might think that TIPS would save you from negative interest rates but this thread proves that to be wrong.

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TomatoTomahto
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Re: TreasuryDirect scammed me? :-)

Post by TomatoTomahto » Mon Aug 03, 2020 7:42 am

I decided years ago that I’m not smart enough to understand individual TIPS and thus don’t own any. Never mind being able to explain them to a smart 12 year old.

I don’t own what I don’t understand, other than, of necessity, my house.
Okay, I get it; I won't be political or controversial. The Earth is flat.

Northern Flicker
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Re: TreasuryDirect scammed me? :-)

Post by Northern Flicker » Mon Aug 03, 2020 12:16 pm

ikowik wrote:
Mon Aug 03, 2020 6:49 am
Northern Flicker wrote:
Sun Aug 02, 2020 7:55 pm
1. VBTLX does not hold TIPS.
2. You are not being scammed.
3. If you buy a CD on the secondary market at a price that is above par, you will only get back par at maturity.

All you've done is to buy up the interest rate you are getting. I think this can have tax consequences with respect to what income you receive is taxed as ordinary income, and what is taxed as a capital gain. But factoring in tge purchase above par, you are getting the market real yield for a 10-year TIPS, which currently is negative.
I feel the bolded part is not entirely correct. The interest bought over 10 years on $100 TIPS with a coupon of 0.125% equals $1.25 total over the 10 years (of course, any extra payments for inflation would be on top of this). If there is no inflation over 10 years, OP would get $100 (to be exact 100.53 as Steve Reading pointed out above) + $1.25- this is less than $111 paid at auction. The extra $9.2 is gone, it is a premium paid for the certainty of getting at least $101.78 after 10 years + protection for unexpected inflation.
0.125 was not the prevailing yield of a 10-yr TIPS at the time of purchase.
Risk is not a guarantor of return.

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