Consistent Yield & Duration to Help Choose TIPS Fund

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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by #Cruncher » Sat Apr 11, 2015 6:59 pm

ps56k in the previous post wrote:SO [ extract from this post by grok87 ] does not seem to paint a pretty picture for International Bonds Index - like Vanguard VTIBX
Grok was referring to unhedged inflation-linked international bonds. Therefore his comments don't really apply to Vanguard Total International Bond Index Fund (VTIBX), which is a USD-hedged nominal international bond fund.
ps56k wrote:do we stay with VIPSX, move to the SPDR version TIPX, or just good old VBMFX
The SPDR® Barclays 1-10 Year TIPS ETF - TIPX includes only TIPS maturing in 1-10 years with an average duration of 5.4 years while the Vanguard Inflation-Protected Securities Fund - VIPSX includes TIPS maturing in 1-30 years with an average duration of 8.2 years. You should decide between them -- in my opinion -- based on their relative yield and duration. This thread is intended to help with that decision. It isn't intended to help decide between TIPS funds in general and nominal bond funds like Vanguard Total Bond Market Index Fund - VBMFX. You'll find lots of other forum threads where that is discussed.

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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by grok87 » Sun Apr 12, 2015 10:05 pm

#Cruncher wrote:
ps56k in the previous post wrote:SO [ extract from this post by grok87 ] does not seem to paint a pretty picture for International Bonds Index - like Vanguard VTIBX
Grok was referring to unhedged inflation-linked international bonds. Therefore his comments don't really apply to Vanguard Total International Bond Index Fund (VTIBX), which is a USD-hedged nominal international bond fund.
agree
"...people always live for ever when there is any annuity to be paid them"- Jane Austen

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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by ps56k » Sun Apr 12, 2015 10:39 pm

tnx for the info -
so much to absorb... at the high levels, and then drilling down to the sub-topics - and then layers under that :)

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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by #Cruncher » Fri Jun 19, 2015 8:43 pm

I've updated the Yield to Maturity and Duration Calculator with WSJ TIPS Prices 06/19/2015 and the weighting effect of auctions of 5-year TIPS in April, 10-year TIPS last month, and 30-year TIPS yesterday. As shown in the table below, the weighted average yield of the 1+ years broad index is 0.14% or 0.68% points more than the -0.54% yield of the 1-5 year short term index, and 0.26% points more than the -0.12% yield of the 1-10 year index. This yield advantage of the 1+ index has increased slightly from what it was three months ago.

Code: Select all

                            Real       Fall if Rates Rise
  #       Real      Avg   Modified    --------------------
TIPS      YTM      Life   Duration     1%      2%      3%       Index
-----    ------    ----   --------   -----   -----   -----   ------------
  15    (0.78%)    2.44     2.41%    2.37%   4.65%   6.86%    0 - 5 Years
  12    (0.54%)    2.92     2.88%    2.83%   5.55%   8.17%    1 - 5 Years
  23    (0.12%)    5.60     5.47%    5.28%  10.19%  14.77%    1 - 10 Years
  36     0.14%     9.43     8.52%    7.94%  14.85%  20.92%    1+ Years
   7     1.02%    26.30    22.25%   19.64%  34.91%  46.82%   15+ Years

Here is a table showing the trend of yields since October 2012.

Code: Select all

    0-5         1-5         1-10         1+         15+
  -------     -------     -------     -------     -------
  (0.78%)     (0.54%)     (0.12%)      0.14%       1.02%     06/19/2015
  (0.74%)     (0.60%)     (0.26%)     (0.05%)      0.58%     03/20/2015
   0.16%      (0.24%)     (0.05%)      0.10%       0.60%     01/23/2015
   0.62%       0.13%       0.28%       0.41%       0.81%     12/19/2014
  (0.26%)     (0.48%)     (0.10%)      0.17%       0.94%     10/24/2014
  (0.30%)     (0.36%)      0.05%       0.31%       1.08%     09/19/2014
  (0.92%)     (0.88%)                 (0.10%)      0.83%     07/25/2014
  (1.34%)     (1.11%)                 (0.10%)      1.04%     06/20/2014
  (1.34%)     (1.13%)                 (0.14%)      1.01%     05/23/2014
  (1.36%)     (1.04%)                 (0.03%)      1.07%     04/25/2014
  (1.31%)     (0.96%)                  0.09%       1.19%     03/21/2014
  (1.47%)     (1.17%)                  0.00%       1.27%     02/21/2014
  (1.15%)     (1.01%)                  0.04%       1.19%     01/24/2014
  (0.65%)     (0.87%)                  0.18%       1.34%     12/20/2013
  (0.75%      (1.00%)                  0.04%       1.27%     11/22/2013
  (0.88%)     (1.00%)                 (0.07%)      1.06%     10/25/2013
  (0.87%)     (0.91%)                  0.06%       1.19%     09/20/2013
  (0.79%)     (0.74%)                  0.21%       1.24%     08/30/2013
  (1.16%)     (1.12%)                 (0.12%)      1.02%     07/19/2013
  (0.56%)     (0.62%)                  0.21%       1.23%     06/21/2013
  (1.18%)     (1.33%)                 (0.62%)      0.44%     05/17/2013
  (1.47%)     (1.59%)                 (0.93%)      0.09%     04/26/2013
  (2.14%)     (1.89%)                 (0.92%)      0.26%     02/15/2013
  (1.29%)     (1.43%)                 (0.87%)     (0.01%)    12/21/2012
  (1.28%)     (1.33%)                 (0.78%)      0.06%     10/26/2012
Yields of short terms TIPS are about the same as three months ago, while long term yields have risen.

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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by jalbert » Sat Jun 20, 2015 2:00 pm

Some years ago, the chief investment officer at TIAA-CREF published an article on their web site explaining the model they used to value a TIP. They see four contributors to return: 1) the income/coupon stream; 2) the regular adjustment to principal based on (the variation of) CPI; 3) changes in principal due to fluctuations in interest rates; and 4) market perception of expected inflation.

In analogy to a stock that goes up when revenue is expected to go up, only to correct again when revenue comes in ahead of or below expectations, TIPs valuations move with market expectations of future inflation and correct when actual inflation is reported. This makes it very difficult to model the behavior of TIPs in response to changing interest rates. If interest rates go up in response to actual inflation, the inflation correction of the TIP will dampen or maybe even exceed the interest rate hit. But rising rates also lower future inflation expectations with downward pressure on the value of a TIP.

I think the best way to choose duration of TIPs is to look at the role for them you've identified in your portfolio, rather than trying to analyze which has superior risk-adjusted return or the more attractive yield-duration tradeoff, which I believe is an exercise in futility due to the complexity. If you primarily want to hedge the short to medium term effects of an unexpected spike in inflation, the shorter duration is preferred as the inflation correction is less diluted by interest rate sensitivity. But if you also want them to diversify the downside risk of stocks in your portfolio, longer duration TIPs will perform better in a disinflationary (falling rate) environment, and hence better diversify the risk of falling stock prices, at the expense of hedging the ridk of unexpected inflation less well.

-jalbert

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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by #Cruncher » Sun Jun 21, 2015 11:02 pm

jalbert in previous post wrote:... TIAA-CREF published an article ... explaining the model they used to value a TIP. They see four contributors to return:
  1. the income/coupon stream;
  2. the regular adjustment to principal based on (the variation of) CPI;
  3. changes in principal due to fluctuations in interest rates; and
  4. market perception of expected inflation.
I disagree. There are no more than three contributors to TIPS return. Number 4, expected inflation, only affects the yield of nominal bonds, not inflation-indexed bonds. If one is only concerned about bond returns in real terms, then there are only two, since number 2, the inflation-indexing of principal, doesn't affect the real return. And if one holds individual TIPS to maturity, then there is only one, since number 3, fluctuations in interest rates can be ignored. However, for a bond fund -- which this thread is about -- number 3 as well as number 1 would be a contributor. (But technically fluctuations in interest rates affect the price, not the principal, of a bond.)

jalbert in previous post wrote:I think the best way to choose duration of TIPs is to look at the role for them you've identified in your portfolio, rather than trying to analyze which has ... the more attractive yield-duration tradeoff, which I believe is an exercise in futility due to the complexity.
I agree, jalbert, that one needs to consider the role one wants for a TIPS fund in order to choose one with the appropriate duration. For example, I wouldn't use any fund longer than a 1-5 year TIPS fund for savings earmarked to pay college expenses in five years.

But I think one should also look at the yield-duration tradeoff. As I try to explain above, the analysis is not so complex to make it futile. (It is actually simpler than it would be for a nominal bond fund, since one can ignore changes in the CPI.) Even if one plans on holding TIPS for a long time, one might want to use a short term fund if one thinks a) long term TIPS rates are unusually low today and b) the yield increment from going to a longer term is too small. I fall in this category and am therefore keeping my average TIPS duration about 6 - 7 years. But if long term TIPS yields were 1.5% points higher, I'd probably increase that to 10-15 years.

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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by jalbert » Tue Jun 23, 2015 1:10 am

The reason changes in expectations of inflation affect the price of TIPs is that if the market believes inflation will increase or decrease, it will price in an estimate to present expected value of the probablistic future event of adjustment to principal.

You can see this quite easily if you look at a decent size sample of daily price moves on days when neither principal adjustments nor coupon payments happen, and compare them to what would have been predicted by the change in interest rates alone. It is why you sometimes see interest rates and TIPs prices move in the same direction without any inflation correction to principal applied on the day of the movement.

I agree with your analysis for TIPs held directly and held to maturity, though, since intermediate prices along the way to maturity don't matter then.

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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by #Cruncher » Tue Jun 23, 2015 11:46 pm

jalbert in previous post wrote:The reason changes in expectations of inflation affect the price of TIPs is that if the market believes inflation will increase or decrease, it will price in an estimate to present expected value of the [ probabilistic ] future event of adjustment to principal.
No, you're missing the essential nature of an inflation-indexed bond. Its price depends on future real cash flows which are independent of how much the CPI changes. [ 1 ] To help see this, imagine a hypothetical $1,000 zero-coupon 10-year TIPS. I.e., in 10 years the investor will receive $1,000 adjusted for the change in the CPI over that time. Assume the TIPS has a 1% yield-to-maturity and is therefore priced at its present value of $905 (905 = 1000 / 1.01 ^ 10).

Assume the market's expectation of future change in the CPI over the next 10 years rises from a 2% to a 3% annual increase. This means its expectation of the future nominal redemption value will increase from $1,219 (1000 X 1.02 ^ 10) to $1,344 (1000 X 1.03 ^ 3). But this has no effect on the $1,000 real redemption value, and hence no effect on the $905 present value.

jalbert in previous post wrote:You can see this quite easily if you look at a decent size sample of daily price moves on days when neither principal adjustments nor coupon payments happen, and compare them to what would have been predicted by the change in interest rates alone.
Jalbert, you don't appear to understand:
  1. How TIPS principal is adjusted. In the secondary market, there are no days without principal adjustments since TIPS principal is adjusted a small amount every day. [ 2 ]
  2. How interest is handled in bond pricing. In the US the price of investment grade bonds is a "clean price" and is unaffected by how close one is to the dates interest is paid. Accrued interest is handled as a separate item in the transaction between buyer and seller.
  3. The relationship between bond prices and interest rates. There is a mathematical relationship between a bond's price and its yield-to-maturity (YTM). So a price move cannot differ from what would be "predicted" by a change in its YTM. (I'm assuming YTM is what you mean by "interest rates".) It would be like a car's liters per 100 kilometers differing from what would be "predicted" based on its miles per gallon.
  1. There are some exceptions where the price of a TIPS does depend on the nominal cash flow, but these are outliers. One is TIPS that mature in the very near future and another is seasonal affects of CPI adjustment. See these two posts for more information: Re: Calculating Yield to Maturity on soon-to-mature TIPS and Re: Seasonal Indexation Impacts in TIPS Prices and Yields.
  2. For example, the Reference CPI (upon which all TIPS' principal adjustments is based) increased 0.016 points every day in June; from 236.119 on 6/1/2015 to 236.599 on 7/1/2015: 0.016 = (236.599 - 236.119) / 30, as shown on Reference CPIs for 2015.

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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by jalbert » Wed Jun 24, 2015 12:37 am

And how do you calculate the daily change in principal from inflation changes? Changes in CPI are not published daily. This is exactly the 4th component I'm talking about. These daily changes are the market pricing in changes to future expected inflation correction.

-jalbert

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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by rrppve » Wed Jun 24, 2015 1:08 am

The Treasury determines the daily inflation adjustment component of a TIPS value not the market. I believe they publish the adjustment factors for the next month based on the prior month's change in CPI.

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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by jalbert » Wed Jun 24, 2015 12:36 pm

But that is monthly, and the daily adjustment to principal rendered by the market certainly isn't a uniform 1/30 of the correction calculated by the previous month. Look at daily price moves and subtract the effect of interest rate changes, and compare to the previous months published CPI data. I believe they will deviate.

-jalbert

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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by rrppve » Wed Jun 24, 2015 4:05 pm

It's basically a noise term. With the release of the CPI, the inflation adjustment to the price is set on a daily basis for the next month. This trues it up. The difference in market price of a TIPS and a nominal bond of the same term does provide the market's view of the spread in real and nominal rates, which is the expected inflation over the term, however the future inflation change affects the nominal bond's price as it does not imply a change in real interest rates.

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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by #Cruncher » Wed Jun 24, 2015 4:53 pm

rrppve in his post this morning wrote:I believe they publish the adjustment factors for the next month based on the prior month's change in CPI.
More specifically ... The daily CPI values (aka Reference CPIs) are interpolated using the CPI 3 months previous and the CPI 2 months previous. So for example, the daily Reference CPIs for June 2015 interpolate between the 236.119 CPI reported for March 2015 and the 236.599 CPI reported for April 2015. (See CPI-U since 1961.) These Reference CPIs are in turn used to compute the daily principal adjustment factors (aka index ratios) for each TIPS.

To see how this works, [ 1 ] let's compute the 1.00468 index ratio used for the 6/30/2015 issue date of the 0.75% coupon Feb 2045 TIPS auctioned earlier this month. (See footnote 2 on the Auctions Results PDF file.)

First interpolate to get the Reference CPI for 6/30/2015:

Code: Select all

236.119 = Reference CPI for 6-01-15 (equals March 2015 CPI-U)
236.583 = Reference CPI for 6-30-15 = 236.119 + 29 * (236.599 - 236.119) / 30
236.599 = Reference CPI for 7-01-15 (equals April 2015 CPI-U)

Now interpolate to get the base Reference CPI for 2/15/2015, the Dated date [ 2 ] of the Feb 2045 TIPS.

Code: Select all

236.151  = Reference CPI for 2-01-15 (equals November 2014 CPI-U)
235.4815 = Reference CPI for 2-15-15 = 236.151 + 14 * (234.812 - 236.151) / 28
234.812  = Reference CPI for 3-01-15 (equals December CPI-U)

And lastly divide the base Ref CPI for 2/15/2015 into the Ref CPI on 6/30/2015 to get the index ratio for that date:

Code: Select all

1.00468 = Ref CPI 6-30-15 / Ref CPI 2-15-15 = 236.583 / 235.4815

You don't need to go through this computation yourself. For example you can obtain the daily index ratios for all TIPS for June 2015 from this TreasuryDirect PDF file (the Feb 2045 is listed next to last) or for the last half of June 2015 from this web page (the Feb 2045 is listed on the last row).

  1. The procedure is explained on on page 857 of Federal Register Vol. 62, No. 3 January 6, 1997 Rules and Regulations or (more readably) in the first two paragraphs of the left sidebar on this web page.
  2. The Dated date of a Treasury bond is the date 6 months before the first interest payment. It equals or slightly precedes the first issue date and for a TIPS is used for the base Reference CPI.

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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by jalbert » Wed Jun 24, 2015 7:00 pm

The adjustment for inflation expectations is a noise term when inflation is stable. If inflation expectations spike significantly, that the market discounts in the expected effect on future CPI principal adjustments efficiently is important for TIPs ability to diversify risk in an equity portfolio. Stocks will price in such an event very efficiently, so a stock/TIPs portfolio would have more volatility than it in fact does if TIPs had to wait for the event to show up in CPI, which might take a few months.

Differing durations of TIPs have somewhat different diversification benefits, which was what I was referring to with respect to role in a portfolio. You can analyze the risk-reward tradeoff of TIPs as a standalone instrument by looking at yields and durations, or you can evaluate them from the perspective of how they diversify the risk of equities under different scenarios.

(My apologies if this is a redundant post. A similar one didn't seem to show up, presumably because I neglected to hit Submit.)

-jalbert

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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by jalbert » Sun Jun 28, 2015 8:24 pm

Thought I would post some more detailed information.

I believe the prevailing view of TIPs pricing is due to the work reported in the following article, which is fairly technical in nature:

http://www.federalreserve.gov/pubs/feds/2010/201019/201019pap.pdf

A key finding was that TIPs have a liquidity premium that was as high as 100 basis points when TIPs were new, but came down as the TIPs market became more liquid and efficient. For instance, there was a time when brokers didn't generally sell TIPs and you had to buy them at auction, say through Treasury Direct for individual investors.

However, the liquidity premium has come down substantially and the TIPs market has become much more efficient as a result, as noted in the above work. I think the linear extrapolation formula on the Federal treasury web site for estimating TIPs prices in between monthly corrections may have been useful when TIPs weren't very liquid, but the market is much more efficient now.

Another issue with comparing TIPs of different durations is that inflation expectations have a term structure just like interest rates. If you look at the difference between real and nominal yields at various points on the yield curve, using market prices for TIPS and treasuries as the basis of the yields, the inflation expectations laden in that difference can vary as you move along the yield curve, giving rise to the term structure of inflation expectations.

Inconsistencies in the yield and duration of TIPs as calculated based on properties of the bond and prevailing interest rate in fact reflect different market expectations for inflation at different points along the the inflation expectation curve. Biasing one's choice of TIPs or a TIPs fund on these differences is really saying that you think the market is underestimating future inflation expectations at that point of the term structure of inflation expectations.

-jalbert

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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by #Cruncher » Sun Jun 28, 2015 11:42 pm

jalbert in previous post wrote:... the linear extrapolation formula on the Federal treasury web site for estimating TIPs prices in between monthly corrections ...
Jalbert, you've managed to squeeze four misconceptions into these few words.
  • The "formula" doesn't produce an estimate; it produces the actual adjustment factors.
  • It deals with principal, not with price.
  • There is no monthly "correction", only a daily one.
  • It uses interpolation, not extrapolation.
In spite of what rrppve and I have said in previous posts above (here, here, here, and here), you don't seem able to grasp how TIPS are adjusted for actual changes in the CPI. You seem to have an idée fixe that the market somehow estimates this. So let me try to explain once more, this time by quoting from this September 25, 1996 news release on the TreasuryDirect web site:
INDEXING METHODOLOGY
The principal of the inflation-protection security will be indexed to the non-seasonally adjusted CPI-U. To calculate the inflation-adjusted principal value for a particular valuation date, the value of the principal at issuance is multiplied by the index ratio applicable to that valuation date. ...
INDEX RATIO
The index ratio for any date is the ratio of the reference CPI applicable to such date to the reference CPI applicable to the original issue date.
REFERENCE CPI
The reference CPI for the first day of any calendar month is the CPI-U for the third preceding calendar month. ... The reference CPI for any other day of the month is calculated by a linear interpolation between the reference CPI applicable to the first day of the month and the reference CPI applicable to the first day of the following month. (underlines added)
If you disagree with any of this or want clarification, Jalbert, please respond specifically. It's frustrating when we explain something to you, and then your next post reads as if you hadn't seen what we said.

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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by jalbert » Mon Jun 29, 2015 8:17 pm

The first TIPs auction was in January 1997. In Sept. 1996, when that news release was issued, there was no secondary market for TIPs. It was unclear in Sept. 1996 how TIPs would be accepted by the markets, and whether an efficient, liquid secondary market would develop. Thus, I believe the treasury was offering a procedure for someone holding a newly issued TIP to understand its value without a secondary market to price it. This is analogous to the interest rate formulas for EE bonds and I-bonds.

But a fairly efficient, reasonably liquid, secondary market for TIPs did develop, and so their price is now established by the market.

The NAV of a Vanguard TIPs fund is computed using market pricing of the TIPs being held, not the formula Sept. 1996 treasury press release.

To take an extreme example for illustration: If I believe inflation is about to spike and run at 10% per year for the next 5 years, but everyone else thinks it will stay in the range of 1.5-2.5% per year for the same period, then I am going to be willing to pay more for a TIP than everyone else. A market prices a security by finding an equilibrium price for supply and demand. Those who think a TIP is overvalued will want to sell at the current price, those who think they are undervalued will want to buy at the current price. The transactions will cause price movements until the buy and sell sentiment is balanced, which is the point where the TIP prices reflect aggregate future inflation expectations, since that is what a rational market participant will use to decide how to value the time series of random variables for the cash flows from future CPI adjustments.

Formulas to price a TIP are just a model for the market. I think the formula from the Sept. 1996 treasury article using linear extrapolation of CPI may be a reasonable model to compute changes in TIPs prices when inflation is very stable and inflation expectations are not changing much, as has been the case the last year or two. Differences in yield/duration tradeoffs will still reflect market sentiment about future inflation expectations. But this formula was not intended to be used to find the daily market price of a TIP in the secondary market once a reasonably efficient, reasonably liquid market developed to price them. The formula for application of CPI does of course apply to the principal adjustment from CPI.

This will be my last post on the matter. It is ok if we disagree.

-jalbert

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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by #Cruncher » Wed Jul 01, 2015 8:15 am

jalbert in previous post wrote:But a fairly efficient, reasonably liquid, secondary market for TIPs did develop, and so their price is now established by the market.
The price of TIPS has always been established by the market. There is no other way it can be established. This begins when the first market price for a TIPS is set at its initial auction. For example, the first TIPS auction January 29, 1997 set the price at 99.379.

People are often confused by the meaning of "price" for TIPS because it is ambiguous. Unfortunately, attempts to clarify the meaning can add to the confusion: "Unadjusted Price" refers to the price per $100 of inflation-adjusted principal, while "Adjusted Price" refers to the price per $100 of unadjusted principal (i.e., face value). [ * ] For example, in the Jan 1997 auction:

Code: Select all

  99.379   = Unadjusted Price = price per $100 of adjusted principal
   1.00104 = Index Ratio on 2/6/1997 issue date (used to adjust the principal)
  99.482   = Adjusted Price = price per $100 of face value = 99.379 * 1.00104
But the Treasury only intended its procedure (shown in my previous post) be used to determine the Index Ratio. Since TIPS were going to be marketable securities (unlike Savings Bonds), the Treasury always expected the market (even if inefficient or illiquid) to set the "Unadjusted Price".

jalbert in same post wrote:The formula for application of CPI does of course apply to the principal adjustment from CPI.
Whew! At least we agree on this! But as I say above, this is all the formula or procedure was ever intended to do.

jalbert in same post wrote:This will be my last post on the matter.
Good idea. This will be mine also.

* When I use the unqualified term "price", I'm referring to the "Unadjusted Price".

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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by #Cruncher » Fri Jul 24, 2015 11:11 pm

By the way, I've just updated my TIPS Ladder Builder spreadsheet (discussed in this thread). It shows that at today's prices, a 30-year 30,000 per year constant dollar ladder can be purchased for $803,000.

I've updated the Yield to Maturity and Duration Calculator with WSJ TIPS Prices 07/24/2015 [*] and the weighting effect of the 10-year TIPS auction yesterday. As shown in the table below, the weighted average yield of the 1+ years broad index is 0.35% or 0.48% points more than the -0.13% yield of the 1-5 year short term index, and 0.18% points more than the 0.17% yield of the 1-10 year index. This yield advantage of the 1+ index has has fallen from what it was a month ago.

Code: Select all

                            Real       Fall if Rates Rise
  #       Real      Avg   Modified    --------------------
TIPS      YTM      Life   Duration     1%      2%      3%       Index
-----    ------    ----   --------   -----   -----   -----   ------------
  15    (0.08%)    2.69     2.66%    2.60%   5.11%   7.52%    0 - 5 Years
  12    (0.13%)    3.19     3.15%    3.08%   6.04%   8.89%    1 - 5 Years
  23     0.17%     5.73     5.61%    5.41%  10.44%  15.12%    1 - 10 Years
  36     0.35%     9.56     8.65%    8.06%  15.08%  21.24%    1+ Years
   7     1.02%    26.21    22.17%   19.57%  34.79%  46.68%   15+ Years

Here is a table showing the trend of yields since October 2012.

Code: Select all

    0-5         1-5         1-10         1+         15+
  -------     -------     -------     -------     -------
  (0.08%)     (0.13%)      0.17%       0.35%       1.02%     07/24/2015
  (0.78%)     (0.54%)     (0.12%)      0.14%       1.02%     06/19/2015
  (0.74%)     (0.60%)     (0.26%)     (0.05%)      0.58%     03/20/2015
   0.16%      (0.24%)     (0.05%)      0.10%       0.60%     01/23/2015
   0.62%       0.13%       0.28%       0.41%       0.81%     12/19/2014
  (0.26%)     (0.48%)     (0.10%)      0.17%       0.94%     10/24/2014
  (0.30%)     (0.36%)      0.05%       0.31%       1.08%     09/19/2014
  (0.92%)     (0.88%)                 (0.10%)      0.83%     07/25/2014
  (1.34%)     (1.11%)                 (0.10%)      1.04%     06/20/2014
  (1.34%)     (1.13%)                 (0.14%)      1.01%     05/23/2014
  (1.36%)     (1.04%)                 (0.03%)      1.07%     04/25/2014
  (1.31%)     (0.96%)                  0.09%       1.19%     03/21/2014
  (1.47%)     (1.17%)                  0.00%       1.27%     02/21/2014
  (1.15%)     (1.01%)                  0.04%       1.19%     01/24/2014
  (0.65%)     (0.87%)                  0.18%       1.34%     12/20/2013
  (0.75%      (1.00%)                  0.04%       1.27%     11/22/2013
  (0.88%)     (1.00%)                 (0.07%)      1.06%     10/25/2013
  (0.87%)     (0.91%)                  0.06%       1.19%     09/20/2013
  (0.79%)     (0.74%)                  0.21%       1.24%     08/30/2013
  (1.16%)     (1.12%)                 (0.12%)      1.02%     07/19/2013
  (0.56%)     (0.62%)                  0.21%       1.23%     06/21/2013
  (1.18%)     (1.33%)                 (0.62%)      0.44%     05/17/2013
  (1.47%)     (1.59%)                 (0.93%)      0.09%     04/26/2013
  (2.14%)     (1.89%)                 (0.92%)      0.26%     02/15/2013
  (1.29%)     (1.43%)                 (0.87%)     (0.01%)    12/21/2012
  (1.28%)     (1.33%)                 (0.78%)      0.06%     10/26/2012
Yields of short terms TIPS have risen significantly in the last month, while long term yields have stayed the same.

* The WSJ doesn't show the new 10-year 0.375% July 2025 TIPS yet. I got it's price from Bloomberg Government Bond quotes.

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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by #Cruncher » Fri Aug 28, 2015 8:11 pm

I've updated the Yield to Maturity and Duration Calculator with WSJ TIPS Prices 08/28/2015 and the weighting effect of the 5-year TIPS auction last week. As shown in the table below, the weighted average yield of the 1+ years broad index is 0.50% or 0.35% points more than the 0.15% yield of the 1-5 year short term index, and 0.16% points more than the 0.34% yield of the 1-10 year index. This yield advantage of the 1+ index has fallen from what it was a month ago.

Code: Select all

                            Real       Fall if Rates Rise
  #       Real      Avg   Modified    --------------------
TIPS      YTM      Life   Duration     1%      2%      3%       Index
-----    ------    ----   --------   -----   -----   -----   ------------
  15     0.42%     2.67     2.64%    2.58%   5.07%   7.46%    0 - 5 Years
  12     0.15%     3.17     3.12%    3.06%   6.00%   8.82%    1 - 5 Years
  23     0.34%     5.61     5.49%    5.30%  10.23%  14.83%    1 - 10 Years
  36     0.50%     9.38     8.49%    7.92%  14.82%  20.89%    1+ Years
   7     1.07%    26.11    22.16%   19.58%  34.82%  46.73%   15+ Years

Here is a table showing the trend of yields since October 2012.

Code: Select all

    0-5         1-5         1-10         1+         15+
  -------     -------     -------     -------     -------
   0.42%       0.15%       0.34%       0.50%       1.07%     08/28/2015
  (0.08%)     (0.13%)      0.17%       0.35%       1.02%     07/24/2015
  (0.78%)     (0.54%)     (0.12%)      0.14%       1.02%     06/19/2015
  (0.74%)     (0.60%)     (0.26%)     (0.05%)      0.58%     03/20/2015
   0.16%      (0.24%)     (0.05%)      0.10%       0.60%     01/23/2015
   0.62%       0.13%       0.28%       0.41%       0.81%     12/19/2014
  (0.26%)     (0.48%)     (0.10%)      0.17%       0.94%     10/24/2014
  (0.30%)     (0.36%)      0.05%       0.31%       1.08%     09/19/2014
  (0.92%)     (0.88%)                 (0.10%)      0.83%     07/25/2014
  (1.34%)     (1.11%)                 (0.10%)      1.04%     06/20/2014
  (1.34%)     (1.13%)                 (0.14%)      1.01%     05/23/2014
  (1.36%)     (1.04%)                 (0.03%)      1.07%     04/25/2014
  (1.31%)     (0.96%)                  0.09%       1.19%     03/21/2014
  (1.47%)     (1.17%)                  0.00%       1.27%     02/21/2014
  (1.15%)     (1.01%)                  0.04%       1.19%     01/24/2014
  (0.65%)     (0.87%)                  0.18%       1.34%     12/20/2013
  (0.75%      (1.00%)                  0.04%       1.27%     11/22/2013
  (0.88%)     (1.00%)                 (0.07%)      1.06%     10/25/2013
  (0.87%)     (0.91%)                  0.06%       1.19%     09/20/2013
  (0.79%)     (0.74%)                  0.21%       1.24%     08/30/2013
  (1.16%)     (1.12%)                 (0.12%)      1.02%     07/19/2013
  (0.56%)     (0.62%)                  0.21%       1.23%     06/21/2013
  (1.18%)     (1.33%)                 (0.62%)      0.44%     05/17/2013
  (1.47%)     (1.59%)                 (0.93%)      0.09%     04/26/2013
  (2.14%)     (1.89%)                 (0.92%)      0.26%     02/15/2013
  (1.29%)     (1.43%)                 (0.87%)     (0.01%)    12/21/2012
  (1.28%)     (1.33%)                 (0.78%)      0.06%     10/26/2012
Yields of short terms TIPS rose significantly over the last month, while yields of long term TIPS rose only slightly. For only the second time since I began this history in October 2012 all indexes have a positive yield-to-maturity.

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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by grok87 » Sat Aug 29, 2015 8:19 am

#Cruncher wrote:IYields of short terms TIPS rose significantly over the last month, while yields of long term TIPS rose only slightly. For only the second time since I began this history in October 2012 all indexes have a positive yield-to-maturity.

thanks. yes it is an interesting time in the tips market. 5 year tips real yield at 0.2% is a good thing.

looking at the 5 year term, the nominal 5 year is at 1.5%. there may be a bit of term premium in that but probably not much. i think it pretty much reflects the fact that investors expect the fed to raise the fed funds rate from the current 0.125% to 3% over the course of the next 5 years (averaging roughly to 1.5%).

then there is inflation. this is a bit of a puzzle. the philly fed survey of professional forecasters pegs inflation for the next 5 years at 2% average for headline and 1.8% for core
https://www.philadelphiafed.org/researc ... 5/survq315

yet breakeven inflation for 5 year tips is around 1.3%- i.e. the 1.5% nominal yield - 0.2% real yield = 1.3% break-even inflation (BEI).

i think there are a couple of things going on.
1) inflation has been lower than expected recently. the fed is supposedly targeting 2% inflation and the philly fed survey may reflect the forecasters confidence that the fed will be able to achieve that. markets seem less confident however.

2) there is probably a bit of an il-liquidity premium built into tips- i.e. they are less liquid than nominal treasuries.

so my quick guess is that true expected inflation over the next 5 year is maybe 1.7% and that the BEI of 1.3% implies at 0.4% illiquidity premium for 5 year tips (compared to 5 year nominals).

cheers.
"...people always live for ever when there is any annuity to be paid them"- Jane Austen

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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by #Cruncher » Fri Oct 23, 2015 7:02 pm

I've updated the Yield to Maturity and Duration Calculator with WSJ TIPS Prices 10/23/2015 and the weighting effect of the 10-year TIPS auction last month and the 30-year TIPS auction yesterday. As shown in the table below, the weighted average yield of the 1+ years broad index is 0.45% or 0.41% points more than the 0.04% yield of the 1-5 year short term index, and 0.18% points more than the 0.27% yield of the 1-10 year index. This yield advantage of the 1+ index is about the same as it was two months ago.

Code: Select all

                            Real       Fall if Rates Rise
  #       Real      Avg   Modified    --------------------
TIPS      YTM      Life   Duration     1%      2%      3%       Index
-----    ------    ----   --------   -----   -----   -----   ------------
  15     0.30%     2.52     2.49%    2.44%   4.79%   7.05%    0 - 5 Years
  12     0.04%     3.01     2.97%    2.91%   5.72%   8.41%    1 - 5 Years
  23     0.27%     5.53     5.41%    5.22%  10.08%  14.62%    1 - 10 Years
  36     0.45%     9.30     8.43%    7.85%  14.70%  20.71%    1+ Years
   7     1.15%    26.09    22.13%   19.55%  34.77%  46.67%   15+ Years

Here is a table showing the trend of yields since October 2012.

Code: Select all

    0-5         1-5         1-10         1+         15+
  -------     -------     -------     -------     -------
   0.30%       0.04%       0.27%       0.45%       1.15%     10/23/2015
   0.42%       0.15%       0.34%       0.50%       1.07%     08/28/2015
  (0.08%)     (0.13%)      0.17%       0.35%       1.02%     07/24/2015
  (0.78%)     (0.54%)     (0.12%)      0.14%       1.02%     06/19/2015
  (0.74%)     (0.60%)     (0.26%)     (0.05%)      0.58%     03/20/2015
   0.16%      (0.24%)     (0.05%)      0.10%       0.60%     01/23/2015
   0.62%       0.13%       0.28%       0.41%       0.81%     12/19/2014
  (0.26%)     (0.48%)     (0.10%)      0.17%       0.94%     10/24/2014
  (0.30%)     (0.36%)      0.05%       0.31%       1.08%     09/19/2014
  (0.92%)     (0.88%)                 (0.10%)      0.83%     07/25/2014
  (1.34%)     (1.11%)                 (0.10%)      1.04%     06/20/2014
  (1.34%)     (1.13%)                 (0.14%)      1.01%     05/23/2014
  (1.36%)     (1.04%)                 (0.03%)      1.07%     04/25/2014
  (1.31%)     (0.96%)                  0.09%       1.19%     03/21/2014
  (1.47%)     (1.17%)                  0.00%       1.27%     02/21/2014
  (1.15%)     (1.01%)                  0.04%       1.19%     01/24/2014
  (0.65%)     (0.87%)                  0.18%       1.34%     12/20/2013
  (0.75%      (1.00%)                  0.04%       1.27%     11/22/2013
  (0.88%)     (1.00%)                 (0.07%)      1.06%     10/25/2013
  (0.87%)     (0.91%)                  0.06%       1.19%     09/20/2013
  (0.79%)     (0.74%)                  0.21%       1.24%     08/30/2013
  (1.16%)     (1.12%)                 (0.12%)      1.02%     07/19/2013
  (0.56%)     (0.62%)                  0.21%       1.23%     06/21/2013
  (1.18%)     (1.33%)                 (0.62%)      0.44%     05/17/2013
  (1.47%)     (1.59%)                 (0.93%)      0.09%     04/26/2013
  (2.14%)     (1.89%)                 (0.92%)      0.26%     02/15/2013
  (1.29%)     (1.43%)                 (0.87%)     (0.01%)    12/21/2012
  (1.28%)     (1.33%)                 (0.78%)      0.06%     10/26/2012
Yields of short and medium term TIPS fell slightly over the last two months, while yields of long term TIPS rose slightly.

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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by #Cruncher » Fri Nov 20, 2015 5:23 pm

I've updated the Yield to Maturity and Duration Calculator with WSJ TIPS Prices 11/20/2015 and the weighting effect of the 10-year TIPS auction yesterday. As shown in the table below, the weighted average yield of the bonds in the 1+ years broad index is 0.55% or 0.40% points more than the 0.15% yield of the 1-5 year short term index, and 0.17% points more than the 0.38% yield of the 1-10 year index. This yield advantage of the 1+ index is about the same as it was a month ago..

Code: Select all

                                Fall if Rates Rise
# of                Modified   ---------------------
TIPS  Yield   Life  Duration     1%      2%      3%        Index
----  -----   ----  --------   -----   -----   -----   -------------
 15   0.33%   2.44    2.40%    2.36%   4.63%   6.82%    0 - 5 Years
 12   0.15%   2.94    2.89%    2.84%   5.57%   8.19%    1 - 5 Years
 23   0.38%   5.52    5.39%    5.20%  10.05%  14.57%    1 - 10 Years
 36   0.55%   9.22    8.35%    7.79%  14.58%  20.55%    1+ Years
  7   1.18%  26.02   22.04%   19.48%  34.66%  46.52%   15+ Years

Here is a table showing the trend of yields since October 2012.

Code: Select all

  0-5         1-5         1-10         1+         15+
-------     -------     -------     -------     -------
 0.33%       0.15%       0.38%       0.55%       1.18%    11/20/2015
 0.30%       0.04%       0.27%       0.45%       1.15%    10/23/2015
 0.42%       0.15%       0.34%       0.50%       1.07%    08/28/2015
(0.08%)     (0.13%)      0.17%       0.35%       1.02%    07/24/2015
(0.78%)     (0.54%)     (0.12%)      0.14%       1.02%    06/19/2015
(0.74%)     (0.60%)     (0.26%)     (0.05%)      0.58%    03/20/2015
 0.16%      (0.24%)     (0.05%)      0.10%       0.60%    01/23/2015
 0.62%       0.13%       0.28%       0.41%       0.81%    12/19/2014
(0.26%)     (0.48%)     (0.10%)      0.17%       0.94%    10/24/2014
(0.30%)     (0.36%)      0.05%       0.31%       1.08%    09/19/2014
(0.92%)     (0.88%)                 (0.10%)      0.83%    07/25/2014
(1.34%)     (1.11%)                 (0.10%)      1.04%    06/20/2014
(1.34%)     (1.13%)                 (0.14%)      1.01%    05/23/2014
(1.36%)     (1.04%)                 (0.03%)      1.07%    04/25/2014
(1.31%)     (0.96%)                  0.09%       1.19%    03/21/2014
(1.47%)     (1.17%)                  0.00%       1.27%    02/21/2014
(1.15%)     (1.01%)                  0.04%       1.19%    01/24/2014
(0.65%)     (0.87%)                  0.18%       1.34%    12/20/2013
(0.75%      (1.00%)                  0.04%       1.27%    11/22/2013
(0.88%)     (1.00%)                 (0.07%)      1.06%    10/25/2013
(0.87%)     (0.91%)                  0.06%       1.19%    09/20/2013
(0.79%)     (0.74%)                  0.21%       1.24%    08/30/2013
(1.16%)     (1.12%)                 (0.12%)      1.02%    07/19/2013
(0.56%)     (0.62%)                  0.21%       1.23%    06/21/2013
(1.18%)     (1.33%)                 (0.62%)      0.44%    05/17/2013
(1.47%)     (1.59%)                 (0.93%)      0.09%    04/26/2013
(2.14%)     (1.89%)                 (0.92%)      0.26%    02/15/2013
(1.29%)     (1.43%)                 (0.87%)     (0.01%)   12/21/2012
(1.28%)     (1.33%)                 (0.78%)      0.06%    10/26/2012
Yields of all maturities rose slightly over the last month.

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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by #Cruncher » Fri Jan 01, 2016 1:19 am

I've updated the Yield to Maturity and Duration Calculator with WSJ TIPS Prices 12/31/2015 and the weighting effect of the 5-year TIPS auction on December 17. As shown in the table below, the weighted average yield of the bonds in the 1+ years broad index is 0.61% or 0.43% points more than the 0.18% yield of the 1-5 year short term index, and 0.18% points more than the 0.43% yield of the 1-10 year index. This yield advantage of the 1+ index is about the same as it was a month ago..

Code: Select all

                                Fall if Rates Rise
# of                Modified   ---------------------
TIPS  Yield   Life  Duration     1%      2%      3%        Index
----  -----   ----  --------   -----   -----   -----   -------------
 15   0.22%   2.39    2.36%    2.31%   4.54%   6.69%    0 - 5 Years
 12   0.18%   2.88    2.84%    2.79%   5.47%   8.05%    1 - 5 Years
 23   0.43%   5.37    5.25%    5.07%   9.80%  14.21%    1 - 10 Years
 36   0.61%   9.00    8.14%    7.60%  14.23%  20.08%    1+ Years
  7   1.25%  25.90   21.88%   19.35%  34.44%  46.26%   15+ Years

Here is a table showing the trend of yields since October 2012.

Code: Select all

  0-5         1-5         1-10         1+         15+
-------     -------     -------     -------     -------
 0.22%       0.18%       0.43%       0.61%       1.25%    12/31/2015
 0.33%       0.15%       0.38%       0.55%       1.18%    11/20/2015
 0.30%       0.04%       0.27%       0.45%       1.15%    10/23/2015
 0.42%       0.15%       0.34%       0.50%       1.07%    08/28/2015
(0.08%)     (0.13%)      0.17%       0.35%       1.02%    07/24/2015
(0.78%)     (0.54%)     (0.12%)      0.14%       1.02%    06/19/2015
(0.74%)     (0.60%)     (0.26%)     (0.05%)      0.58%    03/20/2015
 0.16%      (0.24%)     (0.05%)      0.10%       0.60%    01/23/2015
 0.62%       0.13%       0.28%       0.41%       0.81%    12/19/2014
(0.26%)     (0.48%)     (0.10%)      0.17%       0.94%    10/24/2014
(0.30%)     (0.36%)      0.05%       0.31%       1.08%    09/19/2014
(0.92%)     (0.88%)                 (0.10%)      0.83%    07/25/2014
(1.34%)     (1.11%)                 (0.10%)      1.04%    06/20/2014
(1.34%)     (1.13%)                 (0.14%)      1.01%    05/23/2014
(1.36%)     (1.04%)                 (0.03%)      1.07%    04/25/2014
(1.31%)     (0.96%)                  0.09%       1.19%    03/21/2014
(1.47%)     (1.17%)                  0.00%       1.27%    02/21/2014
(1.15%)     (1.01%)                  0.04%       1.19%    01/24/2014
(0.65%)     (0.87%)                  0.18%       1.34%    12/20/2013
(0.75%      (1.00%)                  0.04%       1.27%    11/22/2013
(0.88%)     (1.00%)                 (0.07%)      1.06%    10/25/2013
(0.87%)     (0.91%)                  0.06%       1.19%    09/20/2013
(0.79%)     (0.74%)                  0.21%       1.24%    08/30/2013
(1.16%)     (1.12%)                 (0.12%)      1.02%    07/19/2013
(0.56%)     (0.62%)                  0.21%       1.23%    06/21/2013
(1.18%)     (1.33%)                 (0.62%)      0.44%    05/17/2013
(1.47%)     (1.59%)                 (0.93%)      0.09%    04/26/2013
(2.14%)     (1.89%)                 (0.92%)      0.26%    02/15/2013
(1.29%)     (1.43%)                 (0.87%)     (0.01%)   12/21/2012
(1.28%)     (1.33%)                 (0.78%)      0.06%    10/26/2012
Yields of maturities over one year rose slightly from last month's levels.

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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by #Cruncher » Sat Jan 30, 2016 11:13 am

I've updated the Yield to Maturity and Duration Calculator with WSJ TIPS Prices 01/29/2016 [*] and the weighting effect of the 10-year TIPS auction on January 21. As shown in the table below, the weighted average yield of the bonds in the 1+ years broad index is 0.37% or 0.45% points more than the -0.08% yield of the 1-5 year short term index, and 0.19% points more than the 0.18% yield of the 1-10 year index. This yield advantage of the 1+ index is about the same as it was a month ago..

Code: Select all

                                Fall if Rates Rise
# of                Modified   ---------------------
TIPS  Yield   Life  Duration     1%      2%      3%        Index
----  -----   ----  --------   -----   -----   -----   -------------
 15   0.06%   2.66    2.62%    2.57%   5.04%   7.42%    0 - 5 Years
 12  (0.08%)  3.14    3.10%    3.04%   5.96%   8.76%    1 - 5 Years
 24   0.18%   5.66    5.52%    5.33%  10.28%  14.89%    1 - 10 Years
 36   0.37%   9.14    8.30%    7.75%  14.51%  20.47%    1+ Years
  7   1.11%  25.84   21.90%   19.37%  34.48%  46.31%   15+ Years

Here is a table showing the trend of yields since October 2012.

Code: Select all

  0-5         1-5         1-10         1+         15+
-------     -------     -------     -------     -------
 0.06%      (0.08%)      0.18%       0.37%       1.11%    01/29/2016
 0.22%       0.18%       0.43%       0.61%       1.25%    12/31/2015
 0.33%       0.15%       0.38%       0.55%       1.18%    11/20/2015
 0.30%       0.04%       0.27%       0.45%       1.15%    10/23/2015
 0.42%       0.15%       0.34%       0.50%       1.07%    08/28/2015
(0.08%)     (0.13%)      0.17%       0.35%       1.02%    07/24/2015
(0.78%)     (0.54%)     (0.12%)      0.14%       1.02%    06/19/2015
(0.74%)     (0.60%)     (0.26%)     (0.05%)      0.58%    03/20/2015
 0.16%      (0.24%)     (0.05%)      0.10%       0.60%    01/23/2015
 0.62%       0.13%       0.28%       0.41%       0.81%    12/19/2014
(0.26%)     (0.48%)     (0.10%)      0.17%       0.94%    10/24/2014
(0.30%)     (0.36%)      0.05%       0.31%       1.08%    09/19/2014
(0.92%)     (0.88%)                 (0.10%)      0.83%    07/25/2014
(1.34%)     (1.11%)                 (0.10%)      1.04%    06/20/2014
(1.34%)     (1.13%)                 (0.14%)      1.01%    05/23/2014
(1.36%)     (1.04%)                 (0.03%)      1.07%    04/25/2014
(1.31%)     (0.96%)                  0.09%       1.19%    03/21/2014
(1.47%)     (1.17%)                  0.00%       1.27%    02/21/2014
(1.15%)     (1.01%)                  0.04%       1.19%    01/24/2014
(0.65%)     (0.87%)                  0.18%       1.34%    12/20/2013
(0.75%      (1.00%)                  0.04%       1.27%    11/22/2013
(0.88%)     (1.00%)                 (0.07%)      1.06%    10/25/2013
(0.87%)     (0.91%)                  0.06%       1.19%    09/20/2013
(0.79%)     (0.74%)                  0.21%       1.24%    08/30/2013
(1.16%)     (1.12%)                 (0.12%)      1.02%    07/19/2013
(0.56%)     (0.62%)                  0.21%       1.23%    06/21/2013
(1.18%)     (1.33%)                 (0.62%)      0.44%    05/17/2013
(1.47%)     (1.59%)                 (0.93%)      0.09%    04/26/2013
(2.14%)     (1.89%)                 (0.92%)      0.26%    02/15/2013
(1.29%)     (1.43%)                 (0.87%)     (0.01%)   12/21/2012
(1.28%)     (1.33%)                 (0.78%)      0.06%    10/26/2012
Yields of all maturities fell moderately from last month's levels.

* The WSJ doesn't yet include the new 0.625% 10-year TIPS auctioned last week. I got its price from Bloomberg's US Government Bonds.

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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by #Cruncher » Thu Mar 31, 2016 5:31 pm

I've updated the Yield to Maturity and Duration Calculator with WSJ TIPS Prices 03/31/2016 and the weighting effect of the 30-year TIPS auction on February 18 and the 10-year TIPS auction on March 17. As shown in the table below, the weighted average yield of the bonds in the 1+ years broad index is -0.07% or 0.62% points more than the -0.69% yield of the 1-5 year short term index, and 0.24% points more than the -0.31% yield of the 1-10 year index. This yield advantage of the 1+ index has increased from what it was two months ago.

Code: Select all

                                Fall if Rates Rise
# of                Modified   ---------------------
TIPS  Yield   Life  Duration     1%      2%      3%        Index
----  -----   ----  --------   -----   -----   -----   -------------
 15  (0.96%)  2.50    2.47%    2.43%   4.76%   7.01%    0 - 5 Years
 12  (0.69%)  2.98    2.95%    2.89%   5.67%   8.34%    1 - 5 Years
 24  (0.31%)  5.58    5.46%    5.27%  10.17%  14.73%    1 - 10 Years
 37  (0.07%)  9.27    8.45%    7.86%  14.70%  20.70%    1+ Years
  8   0.83%  25.93   22.27%   19.68%  35.00%  46.98%   15+ Years

Here is a table showing the trend of yields since October 2012.

Code: Select all

  0-5         1-5         1-10         1+         15+
-------     -------     -------     -------     -------
(0.96%)     (0.69%)     (0.31%)     (0.07%)      0.83%    03/31/2016
 0.06%      (0.08%)      0.18%       0.37%       1.11%    01/29/2016
 0.22%       0.18%       0.43%       0.61%       1.25%    12/31/2015
 0.33%       0.15%       0.38%       0.55%       1.18%    11/20/2015
 0.30%       0.04%       0.27%       0.45%       1.15%    10/23/2015
 0.42%       0.15%       0.34%       0.50%       1.07%    08/28/2015
(0.08%)     (0.13%)      0.17%       0.35%       1.02%    07/24/2015
(0.78%)     (0.54%)     (0.12%)      0.14%       1.02%    06/19/2015
(0.74%)     (0.60%)     (0.26%)     (0.05%)      0.58%    03/20/2015
 0.16%      (0.24%)     (0.05%)      0.10%       0.60%    01/23/2015
 0.62%       0.13%       0.28%       0.41%       0.81%    12/19/2014
(0.26%)     (0.48%)     (0.10%)      0.17%       0.94%    10/24/2014
(0.30%)     (0.36%)      0.05%       0.31%       1.08%    09/19/2014
(0.92%)     (0.88%)                 (0.10%)      0.83%    07/25/2014
(1.34%)     (1.11%)                 (0.10%)      1.04%    06/20/2014
(1.34%)     (1.13%)                 (0.14%)      1.01%    05/23/2014
(1.36%)     (1.04%)                 (0.03%)      1.07%    04/25/2014
(1.31%)     (0.96%)                  0.09%       1.19%    03/21/2014
(1.47%)     (1.17%)                  0.00%       1.27%    02/21/2014
(1.15%)     (1.01%)                  0.04%       1.19%    01/24/2014
(0.65%)     (0.87%)                  0.18%       1.34%    12/20/2013
(0.75%      (1.00%)                  0.04%       1.27%    11/22/2013
(0.88%)     (1.00%)                 (0.07%)      1.06%    10/25/2013
(0.87%)     (0.91%)                  0.06%       1.19%    09/20/2013
(0.79%)     (0.74%)                  0.21%       1.24%    08/30/2013
(1.16%)     (1.12%)                 (0.12%)      1.02%    07/19/2013
(0.56%)     (0.62%)                  0.21%       1.23%    06/21/2013
(1.18%)     (1.33%)                 (0.62%)      0.44%    05/17/2013
(1.47%)     (1.59%)                 (0.93%)      0.09%    04/26/2013
(2.14%)     (1.89%)                 (0.92%)      0.26%    02/15/2013
(1.29%)     (1.43%)                 (0.87%)     (0.01%)   12/21/2012
(1.28%)     (1.33%)                 (0.78%)      0.06%    10/26/2012
Yields of all maturities fell significantly during the past two months, with short term yields falling the most. All indexes except for the 15+ have negative yields for the first time in a year.

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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by #Cruncher » Thu Jun 30, 2016 8:55 pm

I've updated the Yield to Maturity and Duration Calculator with WSJ TIPS Prices 06/30/2016 and the weighting effect of the 5-year, 10-year, and 30-year auctions in April, May, and June of this year. As shown in the table below, the weighted average yield of the bonds in the 1+ years broad index is -0.11% or 0.56% points more than the -0.67% yield of the 1-5 year short term index, and 0.22% points more than the -0.33% yield of the 1-10 year index. This yield advantage of the 1+ index is about what it was three months ago.

Code: Select all

                                Fall if Rates Rise
# of                Modified   ---------------------
TIPS  Yield   Life  Duration     1%      2%      3%        Index
----  -----   ----  --------   -----   -----   -----   -------------
 15  (0.91%)  2.57    2.54%    2.49%   4.89%   7.21%    0 - 5 Years
 12  (0.67%)  3.08    3.04%    2.98%   5.85%   8.61%    1 - 5 Years
 24  (0.33%)  5.65    5.52%    5.33%  10.29%  14.92%    1 - 10 Years
 37  (0.11%)  9.48    8.65%    8.04%  15.03%  21.14%    1+ Years
  8   0.68%  25.84   22.27%   19.68%  35.00%  46.98%   15+ Years

Here is a table showing the trend of yields since October 2012.

Code: Select all

  0-5         1-5         1-10         1+         15+

Code: Select all

(0.91%)     (0.67%)     (0.33%)     (0.11%)      0.68%    06/30/2016
(0.96%)     (0.69%)     (0.31%)     (0.07%)      0.83%    03/31/2016
 0.06%      (0.08%)      0.18%       0.37%       1.11%    01/29/2016
 0.22%       0.18%       0.43%       0.61%       1.25%    12/31/2015
 0.33%       0.15%       0.38%       0.55%       1.18%    11/20/2015
 0.30%       0.04%       0.27%       0.45%       1.15%    10/23/2015
 0.42%       0.15%       0.34%       0.50%       1.07%    08/28/2015
(0.08%)     (0.13%)      0.17%       0.35%       1.02%    07/24/2015
(0.78%)     (0.54%)     (0.12%)      0.14%       1.02%    06/19/2015
(0.74%)     (0.60%)     (0.26%)     (0.05%)      0.58%    03/20/2015
 0.16%      (0.24%)     (0.05%)      0.10%       0.60%    01/23/2015
 0.62%       0.13%       0.28%       0.41%       0.81%    12/19/2014
(0.26%)     (0.48%)     (0.10%)      0.17%       0.94%    10/24/2014
(0.30%)     (0.36%)      0.05%       0.31%       1.08%    09/19/2014
(0.92%)     (0.88%)                 (0.10%)      0.83%    07/25/2014
(1.34%)     (1.11%)                 (0.10%)      1.04%    06/20/2014
(1.34%)     (1.13%)                 (0.14%)      1.01%    05/23/2014
(1.36%)     (1.04%)                 (0.03%)      1.07%    04/25/2014
(1.31%)     (0.96%)                  0.09%       1.19%    03/21/2014
(1.47%)     (1.17%)                  0.00%       1.27%    02/21/2014
(1.15%)     (1.01%)                  0.04%       1.19%    01/24/2014
(0.65%)     (0.87%)                  0.18%       1.34%    12/20/2013
(0.75%      (1.00%)                  0.04%       1.27%    11/22/2013
(0.88%)     (1.00%)                 (0.07%)      1.06%    10/25/2013
(0.87%)     (0.91%)                  0.06%       1.19%    09/20/2013
(0.79%)     (0.74%)                  0.21%       1.24%    08/30/2013
(1.16%)     (1.12%)                 (0.12%)      1.02%    07/19/2013
(0.56%)     (0.62%)                  0.21%       1.23%    06/21/2013
(1.18%)     (1.33%)                 (0.62%)      0.44%    05/17/2013
(1.47%)     (1.59%)                 (0.93%)      0.09%    04/26/2013
(2.14%)     (1.89%)                 (0.92%)      0.26%    02/15/2013
(1.29%)     (1.43%)                 (0.87%)     (0.01%)   12/21/2012
(1.28%)     (1.33%)                 (0.78%)      0.06%    10/26/2012
The average yield of the long term 15+ index fell moderately over the past three months, while average yields of the shorter term indexes were little changed. (The fall in long term yields has all occurred since the vote last week in the UK to leave the EU. For example, at the 6/22/2016 re-opening auction, the day before the vote, the Feb 2046 TIPS yield came in at 0.905%. But according to WSJ TIPS Prices 06/30/2016, its closing yield today was 0.677%.)

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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by #Cruncher » Fri Sep 30, 2016 4:15 pm

I've updated the Yield to Maturity and Duration Calculator with WSJ TIPS Prices 09/30/2016 and the weighting effect of the 5-year auction in August and the 10-year auctions in July and September. As shown in the table below, the weighted average yield of the bonds in the 1+ years broad index is -0.10% or 0.45% points more than the -0.55% yield of the 1-5 year short term index, and 0.20% points more than the -0.30% yield of the 1-10 year index. This yield advantage of the 1+ index is slightly less than what it was three months ago.

Code: Select all

                                Fall if Rates Rise
# of                Modified   ---------------------
TIPS  Yield   Life  Duration     1%      2%      3%        Index
----  -----   ----  --------   -----   -----   -----   -------------
 15  (0.59%)  2.71    2.68%    2.63%   5.16%   7.60%    0 - 5 Years
 12  (0.55%)  3.17    3.14%    3.07%   6.03%   8.86%    1 - 5 Years
 24  (0.30%)  5.60    5.49%    5.29%  10.23%  14.82%    1 - 10 Years
 37  (0.10%)  9.35    8.57%    7.97%  14.90%  20.98%    1+ Years
  8   0.59%  25.60   22.19%   19.63%  34.94%  46.94%   15+ Years

Here is a table showing the trend of yields since October 2012.

Code: Select all

  0-5         1-5         1-10         1+         15+

Code: Select all

(0.59%)     (0.55%)     (0.30%)     (0.10%)      0.59%    09/30/2016
(0.91%)     (0.67%)     (0.33%)     (0.11%)      0.68%    06/30/2016
(0.96%)     (0.69%)     (0.31%)     (0.07%)      0.83%    03/31/2016
 0.06%      (0.08%)      0.18%       0.37%       1.11%    01/29/2016
 0.22%       0.18%       0.43%       0.61%       1.25%    12/31/2015
 0.33%       0.15%       0.38%       0.55%       1.18%    11/20/2015
 0.30%       0.04%       0.27%       0.45%       1.15%    10/23/2015
 0.42%       0.15%       0.34%       0.50%       1.07%    08/28/2015
(0.08%)     (0.13%)      0.17%       0.35%       1.02%    07/24/2015
(0.78%)     (0.54%)     (0.12%)      0.14%       1.02%    06/19/2015
(0.74%)     (0.60%)     (0.26%)     (0.05%)      0.58%    03/20/2015
 0.16%      (0.24%)     (0.05%)      0.10%       0.60%    01/23/2015
 0.62%       0.13%       0.28%       0.41%       0.81%    12/19/2014
(0.26%)     (0.48%)     (0.10%)      0.17%       0.94%    10/24/2014
(0.30%)     (0.36%)      0.05%       0.31%       1.08%    09/19/2014
(0.92%)     (0.88%)                 (0.10%)      0.83%    07/25/2014
(1.34%)     (1.11%)                 (0.10%)      1.04%    06/20/2014
(1.34%)     (1.13%)                 (0.14%)      1.01%    05/23/2014
(1.36%)     (1.04%)                 (0.03%)      1.07%    04/25/2014
(1.31%)     (0.96%)                  0.09%       1.19%    03/21/2014
(1.47%)     (1.17%)                  0.00%       1.27%    02/21/2014
(1.15%)     (1.01%)                  0.04%       1.19%    01/24/2014
(0.65%)     (0.87%)                  0.18%       1.34%    12/20/2013
(0.75%      (1.00%)                  0.04%       1.27%    11/22/2013
(0.88%)     (1.00%)                 (0.07%)      1.06%    10/25/2013
(0.87%)     (0.91%)                  0.06%       1.19%    09/20/2013
(0.79%)     (0.74%)                  0.21%       1.24%    08/30/2013
(1.16%)     (1.12%)                 (0.12%)      1.02%    07/19/2013
(0.56%)     (0.62%)                  0.21%       1.23%    06/21/2013
(1.18%)     (1.33%)                 (0.62%)      0.44%    05/17/2013
(1.47%)     (1.59%)                 (0.93%)      0.09%    04/26/2013
(2.14%)     (1.89%)                 (0.92%)      0.26%    02/15/2013
(1.29%)     (1.43%)                 (0.87%)     (0.01%)   12/21/2012
(1.28%)     (1.33%)                 (0.78%)      0.06%    10/26/2012
The average yield of the long term 15+ index fell slightly over the past three months, while average yields of the shorter term indexes rose slightly.

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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by #Cruncher » Fri Dec 30, 2016 4:37 pm

I've updated the Yield to Maturity and Duration Calculator with WSJ TIPS Prices 12/30/2016 and the weighting effect of the 30-year auction in October, the 10-year auction in November, and the 5-year auction in December. As shown in the table below, the weighted average yield of the bonds in the 1+ years broad index is +0.22% or 0.59% points more than the -0.37% yield of the 1-5 year short term index, and 0.21% points more than the 0.01% yield of the 1-10 year index. This yield advantage of the 1+ index versus the 1-5 index is slightly better than what it was three months ago. Versus the 1-10 index it's about the same.

Code: Select all

                                Fall if Rates Rise
# of                Modified   ---------------------
TIPS  Yield   Life  Duration     1%      2%      3%        Index
----  -----   ----  --------   -----   -----   -----   -------------
 15  (0.33%)  2.50    2.48%    2.43%   4.77%   7.02%    0 - 5 Years
 12  (0.37%)  2.96    2.92%    2.87%   5.63%   8.28%    1 - 5 Years
 24   0.01%   5.35    5.23%    5.05%   9.77%  14.18%    1 - 10 Years
 37   0.22%   8.96    8.17%    7.61%  14.24%  20.07%    1+ Years
  8   0.97%  25.44   21.81%   19.32%  34.42%  46.27%   15+ Years

Here is a table showing the trend of yields since October 2012.

Code: Select all

  0-5         1-5         1-10         1+         15+

Code: Select all

(0.33%)     (0.37%)      0.01%       0.22%       0.97%    12/30/2016
(0.59%)     (0.55%)     (0.30%)     (0.10%)      0.59%    09/30/2016
(0.91%)     (0.67%)     (0.33%)     (0.11%)      0.68%    06/30/2016
(0.96%)     (0.69%)     (0.31%)     (0.07%)      0.83%    03/31/2016
 0.06%      (0.08%)      0.18%       0.37%       1.11%    01/29/2016
 0.22%       0.18%       0.43%       0.61%       1.25%    12/31/2015
 0.33%       0.15%       0.38%       0.55%       1.18%    11/20/2015
 0.30%       0.04%       0.27%       0.45%       1.15%    10/23/2015
 0.42%       0.15%       0.34%       0.50%       1.07%    08/28/2015
(0.08%)     (0.13%)      0.17%       0.35%       1.02%    07/24/2015
(0.78%)     (0.54%)     (0.12%)      0.14%       1.02%    06/19/2015
(0.74%)     (0.60%)     (0.26%)     (0.05%)      0.58%    03/20/2015
 0.16%      (0.24%)     (0.05%)      0.10%       0.60%    01/23/2015
 0.62%       0.13%       0.28%       0.41%       0.81%    12/19/2014
(0.26%)     (0.48%)     (0.10%)      0.17%       0.94%    10/24/2014
(0.30%)     (0.36%)      0.05%       0.31%       1.08%    09/19/2014
(0.92%)     (0.88%)                 (0.10%)      0.83%    07/25/2014
(1.34%)     (1.11%)                 (0.10%)      1.04%    06/20/2014
(1.34%)     (1.13%)                 (0.14%)      1.01%    05/23/2014
(1.36%)     (1.04%)                 (0.03%)      1.07%    04/25/2014
(1.31%)     (0.96%)                  0.09%       1.19%    03/21/2014
(1.47%)     (1.17%)                  0.00%       1.27%    02/21/2014
(1.15%)     (1.01%)                  0.04%       1.19%    01/24/2014
(0.65%)     (0.87%)                  0.18%       1.34%    12/20/2013
(0.75%      (1.00%)                  0.04%       1.27%    11/22/2013
(0.88%)     (1.00%)                 (0.07%)      1.06%    10/25/2013
(0.87%)     (0.91%)                  0.06%       1.19%    09/20/2013
(0.79%)     (0.74%)                  0.21%       1.24%    08/30/2013
(1.16%)     (1.12%)                 (0.12%)      1.02%    07/19/2013
(0.56%)     (0.62%)                  0.21%       1.23%    06/21/2013
(1.18%)     (1.33%)                 (0.62%)      0.44%    05/17/2013
(1.47%)     (1.59%)                 (0.93%)      0.09%    04/26/2013
(2.14%)     (1.89%)                 (0.92%)      0.26%    02/15/2013
(1.29%)     (1.43%)                 (0.87%)     (0.01%)   12/21/2012
(1.28%)     (1.33%)                 (0.78%)      0.06%    10/26/2012
Yields of short term TIPS have risen about 0.2% points over the past three months, while yields of long term TIPS have risen about 0.4% points.

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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by #Cruncher » Fri Mar 31, 2017 8:36 pm

I've updated the Yield to Maturity and Duration Calculator with WSJ TIPS Prices 03/31/2017 and the weighting effect of the 10-year auctions in January & March, and the 30-year auction in February. As shown in the table below, the weighted average yield of the bonds in the 1+ years broad index is +0.12% or 0.59% points more than the -0.47% yield of the 1-5 year short term index, and 0.20% points more than the -0.08% yield of the 1-10 year index. This yield advantage of the 1+ index versus the 1-5 and 1-10 indexes is almost identical to what it was three months ago.

Code: Select all

                                Fall if Rates Rise
# of                Modified   ---------------------
TIPS  Yield   Life  Duration     1%      2%      3%        Index
----  -----   ----  --------   -----   -----   -----   -------------
 15  (0.84%)  2.57    2.55%    2.50%   4.91%   7.23%    0 - 5 Years
 12  (0.47%)  3.00    2.98%    2.92%   5.73%   8.44%    1 - 5 Years
 25  (0.08%)  5.44    5.32%    5.14%   9.92%  14.39%    1 - 10 Years
 38   0.12%   9.02    8.25%    7.68%  14.37%  20.23%    1+ Years
  9   0.89%  25.38   21.91%   19.40%  34.57%  46.48%   15+ Years

Here is a table showing the trend of yields since October 2012.

Code: Select all

  0-5         1-5         1-10         1+         15+

Code: Select all

(0.84%)     (0.47%)     (0.08%)      0.12%       0.89%    03/31/2017
(0.33%)     (0.37%)      0.01%       0.22%       0.97%    12/30/2016
(0.59%)     (0.55%)     (0.30%)     (0.10%)      0.59%    09/30/2016
(0.91%)     (0.67%)     (0.33%)     (0.11%)      0.68%    06/30/2016
(0.96%)     (0.69%)     (0.31%)     (0.07%)      0.83%    03/31/2016
 0.06%      (0.08%)      0.18%       0.37%       1.11%    01/29/2016
 0.22%       0.18%       0.43%       0.61%       1.25%    12/31/2015
 0.33%       0.15%       0.38%       0.55%       1.18%    11/20/2015
 0.30%       0.04%       0.27%       0.45%       1.15%    10/23/2015
 0.42%       0.15%       0.34%       0.50%       1.07%    08/28/2015
(0.08%)     (0.13%)      0.17%       0.35%       1.02%    07/24/2015
(0.78%)     (0.54%)     (0.12%)      0.14%       1.02%    06/19/2015
(0.74%)     (0.60%)     (0.26%)     (0.05%)      0.58%    03/20/2015
 0.16%      (0.24%)     (0.05%)      0.10%       0.60%    01/23/2015
 0.62%       0.13%       0.28%       0.41%       0.81%    12/19/2014
(0.26%)     (0.48%)     (0.10%)      0.17%       0.94%    10/24/2014
(0.30%)     (0.36%)      0.05%       0.31%       1.08%    09/19/2014
(0.92%)     (0.88%)                 (0.10%)      0.83%    07/25/2014
(1.34%)     (1.11%)                 (0.10%)      1.04%    06/20/2014
(1.34%)     (1.13%)                 (0.14%)      1.01%    05/23/2014
(1.36%)     (1.04%)                 (0.03%)      1.07%    04/25/2014
(1.31%)     (0.96%)                  0.09%       1.19%    03/21/2014
(1.47%)     (1.17%)                  0.00%       1.27%    02/21/2014
(1.15%)     (1.01%)                  0.04%       1.19%    01/24/2014
(0.65%)     (0.87%)                  0.18%       1.34%    12/20/2013
(0.75%      (1.00%)                  0.04%       1.27%    11/22/2013
(0.88%)     (1.00%)                 (0.07%)      1.06%    10/25/2013
(0.87%)     (0.91%)                  0.06%       1.19%    09/20/2013
(0.79%)     (0.74%)                  0.21%       1.24%    08/30/2013
(1.16%)     (1.12%)                 (0.12%)      1.02%    07/19/2013
(0.56%)     (0.62%)                  0.21%       1.23%    06/21/2013
(1.18%)     (1.33%)                 (0.62%)      0.44%    05/17/2013
(1.47%)     (1.59%)                 (0.93%)      0.09%    04/26/2013
(2.14%)     (1.89%)                 (0.92%)      0.26%    02/15/2013
(1.29%)     (1.43%)                 (0.87%)     (0.01%)   12/21/2012
(1.28%)     (1.33%)                 (0.78%)      0.06%    10/26/2012
Yields of all maturities have fallen slightly over the past three months.

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#Cruncher
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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by #Cruncher » Fri Jun 30, 2017 8:15 pm

I've updated the Yield to Maturity and Duration Calculator with WSJ TIPS Prices 06/30/2017 and the weighting effect of the 5-year auction in April, the 10-year auction in May, and the 30-year auction in June. As shown in the table below, the weighted average yield of the bonds in the 1+ years broad index is +0.38% or 0.37% points more than the +0.01% yield of the 1-5 year short term index, and 0.15% points more than the +0.23% yield of the 1-10 year index. This yield advantage of the 1+ index versus the 1-5 and 1-10 indexes is less than what it was three months ago; i.e., the TIPS yield curve is rising less steeply.

Code: Select all

                                Fall if Rates Rise
# of                Modified   ---------------------
TIPS  Yield   Life  Duration     1%      2%      3%        Index
----  -----   ----  --------   -----   -----   -----   -------------
 15   0.06%   2.64    2.62%    2.57%   5.04%   7.42%    0 - 5 Years
 12   0.01%   3.09    3.06%    3.00%   5.89%   8.66%    1 - 5 Years
 25   0.23%   5.50    5.37%    5.18%  10.02%  14.53%    1 - 10 Years
 38   0.38%   9.17    8.36%    7.79%  14.56%  20.50%    1+ Years
  8   0.96%  25.80   22.25%   19.69%  35.04%  47.07%   15+ Years
Here is a table showing the trend of yields since October 2012.

Code: Select all

  0-5         1-5        1-10          1+         15+

Code: Select all

 0.06%       0.01%       0.23%       0.38%       0.96%    06/30/2017
(0.84%)     (0.47%)     (0.08%)      0.12%       0.89%    03/31/2017
(0.33%)     (0.37%)      0.01%       0.22%       0.97%    12/30/2016
(0.59%)     (0.55%)     (0.30%)     (0.10%)      0.59%    09/30/2016
(0.91%)     (0.67%)     (0.33%)     (0.11%)      0.68%    06/30/2016
(0.96%)     (0.69%)     (0.31%)     (0.07%)      0.83%    03/31/2016
 0.06%      (0.08%)      0.18%       0.37%       1.11%    01/29/2016
 0.22%       0.18%       0.43%       0.61%       1.25%    12/31/2015
 0.33%       0.15%       0.38%       0.55%       1.18%    11/20/2015
 0.30%       0.04%       0.27%       0.45%       1.15%    10/23/2015
 0.42%       0.15%       0.34%       0.50%       1.07%    08/28/2015
(0.08%)     (0.13%)      0.17%       0.35%       1.02%    07/24/2015
(0.78%)     (0.54%)     (0.12%)      0.14%       1.02%    06/19/2015
(0.74%)     (0.60%)     (0.26%)     (0.05%)      0.58%    03/20/2015
 0.16%      (0.24%)     (0.05%)      0.10%       0.60%    01/23/2015
 0.62%       0.13%       0.28%       0.41%       0.81%    12/19/2014
(0.26%)     (0.48%)     (0.10%)      0.17%       0.94%    10/24/2014
(0.30%)     (0.36%)      0.05%       0.31%       1.08%    09/19/2014
(0.92%)     (0.88%)                 (0.10%)      0.83%    07/25/2014
(1.34%)     (1.11%)                 (0.10%)      1.04%    06/20/2014
(1.34%)     (1.13%)                 (0.14%)      1.01%    05/23/2014
(1.36%)     (1.04%)                 (0.03%)      1.07%    04/25/2014
(1.31%)     (0.96%)                  0.09%       1.19%    03/21/2014
(1.47%)     (1.17%)                  0.00%       1.27%    02/21/2014
(1.15%)     (1.01%)                  0.04%       1.19%    01/24/2014
(0.65%)     (0.87%)                  0.18%       1.34%    12/20/2013
(0.75%      (1.00%)                  0.04%       1.27%    11/22/2013
(0.88%)     (1.00%)                 (0.07%)      1.06%    10/25/2013
(0.87%)     (0.91%)                  0.06%       1.19%    09/20/2013
(0.79%)     (0.74%)                  0.21%       1.24%    08/30/2013
(1.16%)     (1.12%)                 (0.12%)      1.02%    07/19/2013
(0.56%)     (0.62%)                  0.21%       1.23%    06/21/2013
(1.18%)     (1.33%)                 (0.62%)      0.44%    05/17/2013
(1.47%)     (1.59%)                 (0.93%)      0.09%    04/26/2013
(2.14%)     (1.89%)                 (0.92%)      0.26%    02/15/2013
(1.29%)     (1.43%)                 (0.87%)     (0.01%)   12/21/2012
(1.28%)     (1.33%)                 (0.78%)      0.06%    10/26/2012
Yields of all maturities have risen over the past three months ranging from a significant rise for short maturities to a slight rise for long maturities. Note: the "15+" index, which is tracked by the PIMCO LTPZ ETF, no longer includes any TIPS maturing earlier than 2040. The April 2032 now matures in less than 15 years and there are no TIPS at all maturing 2033-2039. Only a small amount of the April 2032 was issued so its absence from the index has little effect on the average yield or duration.

Here is a list of the index funds and ETFs I'm aware of that follow the five indexes. Each is preceded by its expense ratio. I would subtract the expense ratio from the index yield to estimate its future return if TIPS interest rates don't change. For example, I'd estimate the Fidelity FSIYX fund would return 0.29% in real terms (+0.38% - 0.09%). [*]
* However for the 0-5 funds, I'd subtract the expense ratio from the yield for the 1-5 index. The reason for this is the yield of the 0-5 index can be skewed by TIPS near to maturity. For example as of 6/30/2017 the 0-5 index includes the TIPS maturing in about two weeks on 7/15/2017. Because the market is valuing it as a nominal bond, it's real yield is not meaningful and may distort the average. So, for example, I'd estimate the future return of VTAPX would be -0.06% in real terms (+0.01% - 0.07%).

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elgob.bogle
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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by elgob.bogle » Sun Jul 02, 2017 8:55 am

# Cruncher noted: "I'd estimate the future return of VTAPX would be -0.06% in real terms (+0.01% - 0.07%)"

Too bad, we have a bunch of this fund, hoping to protect the value before future withdrawals. Oh Well!

elgob

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#Cruncher
Posts: 2420
Joined: Fri May 14, 2010 2:33 am
Location: New York City
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Re: Consistent Yield & Duration to Help Choose TIPS Fund

Post by #Cruncher » Fri Sep 29, 2017 7:53 pm

I've updated the Yield to Maturity and Duration Calculator with WSJ TIPS Prices 09/29/2017 and the weighting effect of the 5-year auction in August and the 10-year auctions in July & September. As shown in the table below, the weighted average yield of the bonds in the 1+ years broad index is +0.28% or 0.39% points more than the -0.11% yield of the 1-5 year short term index, and 0.16% points more than the +0.12% yield of the 1-10 year index. This yield advantage of the 1+ index versus the 1-5 and 1-10 indexes is about what it was three months ago.

Code: Select all

                                Fall if Rates Rise
# of                Modified   ---------------------
TIPS  Yield   Life  Duration     1%      2%      3%        Index
----  -----   ----  --------   -----   -----   -----   -------------
 15  (0.14%)  2.73    2.71%    2.66%   5.22%   7.68%    0 - 5 Years
 12  (0.11%)  3.17    3.15%    3.08%   6.05%   8.89%    1 - 5 Years
 25   0.12%   5.45    5.33%    5.15%   9.95%  14.44%    1 - 10 Years
 38   0.28%   9.03    8.27%    7.71%  14.42%  20.31%    1+ Years
  8   0.89%  25.55   22.17%   19.63%  34.98%  47.01%   15+ Years
Here is a table showing the trend of yields since October 2012.

Code: Select all

  0-5         1-5        1-10          1+         15+

Code: Select all

(0.14%)     (0.11%)      0.12%       0.28%       0.89%    09/29/2017
 0.06%       0.01%       0.23%       0.38%       0.96%    06/30/2017
(0.84%)     (0.47%)     (0.08%)      0.12%       0.89%    03/31/2017
(0.33%)     (0.37%)      0.01%       0.22%       0.97%    12/30/2016
(0.59%)     (0.55%)     (0.30%)     (0.10%)      0.59%    09/30/2016
(0.91%)     (0.67%)     (0.33%)     (0.11%)      0.68%    06/30/2016
(0.96%)     (0.69%)     (0.31%)     (0.07%)      0.83%    03/31/2016
 0.06%      (0.08%)      0.18%       0.37%       1.11%    01/29/2016
 0.22%       0.18%       0.43%       0.61%       1.25%    12/31/2015
 0.33%       0.15%       0.38%       0.55%       1.18%    11/20/2015
 0.30%       0.04%       0.27%       0.45%       1.15%    10/23/2015
 0.42%       0.15%       0.34%       0.50%       1.07%    08/28/2015
(0.08%)     (0.13%)      0.17%       0.35%       1.02%    07/24/2015
(0.78%)     (0.54%)     (0.12%)      0.14%       1.02%    06/19/2015
(0.74%)     (0.60%)     (0.26%)     (0.05%)      0.58%    03/20/2015
 0.16%      (0.24%)     (0.05%)      0.10%       0.60%    01/23/2015
 0.62%       0.13%       0.28%       0.41%       0.81%    12/19/2014
(0.26%)     (0.48%)     (0.10%)      0.17%       0.94%    10/24/2014
(0.30%)     (0.36%)      0.05%       0.31%       1.08%    09/19/2014
(0.92%)     (0.88%)                 (0.10%)      0.83%    07/25/2014
(1.34%)     (1.11%)                 (0.10%)      1.04%    06/20/2014
(1.34%)     (1.13%)                 (0.14%)      1.01%    05/23/2014
(1.36%)     (1.04%)                 (0.03%)      1.07%    04/25/2014
(1.31%)     (0.96%)                  0.09%       1.19%    03/21/2014
(1.47%)     (1.17%)                  0.00%       1.27%    02/21/2014
(1.15%)     (1.01%)                  0.04%       1.19%    01/24/2014
(0.65%)     (0.87%)                  0.18%       1.34%    12/20/2013
(0.75%      (1.00%)                  0.04%       1.27%    11/22/2013
(0.88%)     (1.00%)                 (0.07%)      1.06%    10/25/2013
(0.87%)     (0.91%)                  0.06%       1.19%    09/20/2013
(0.79%)     (0.74%)                  0.21%       1.24%    08/30/2013
(1.16%)     (1.12%)                 (0.12%)      1.02%    07/19/2013
(0.56%)     (0.62%)                  0.21%       1.23%    06/21/2013
(1.18%)     (1.33%)                 (0.62%)      0.44%    05/17/2013
(1.47%)     (1.59%)                 (0.93%)      0.09%    04/26/2013
(2.14%)     (1.89%)                 (0.92%)      0.26%    02/15/2013
(1.29%)     (1.43%)                 (0.87%)     (0.01%)   12/21/2012
(1.28%)     (1.33%)                 (0.78%)      0.06%    10/26/2012
Yields of all maturities fell slightly over the past three months.

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