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Topic Author
exodusing
Posts: 820
Joined: Thu Oct 13, 2022 7:32 am

I'd like to make sure this is correct. If I have a ladder of TIPS, the cash received in each year would be approximately equal to:

1) The principle maturing that year = number of bonds * inflation factor * 1,000

2) The interest paid that year: for each bond in the ladder with a maturity year greater than or equal to the year in question = number of bonds * inflation factor * 1,000 * coupon

Interest is paid twice a year, so this will be off a bit.
IDpilot
Posts: 65
Joined: Sat Dec 05, 2020 7:13 am

Need to tweak your formula for interest paid in the year a bond matures. Bonds that have a maturity date before June will only make the one interest payment at maturity while those that after June 1 will make two.
watchnerd
Posts: 11067
Joined: Sat Mar 03, 2007 10:18 am
Location: Seattle, WA, USA

I don't even bother calculating the interest payments given how low the coupon rates are right now.

I just pay attention to the non-rolling rungs maturing every 6 months.
65% Global Market Stocks | 31% Global Market Credit | 4% Global Market Weight Gold, Crypto || LMP TIPS
Topic Author
exodusing
Posts: 820
Joined: Thu Oct 13, 2022 7:32 am

IDpilot wrote: Wed May 24, 2023 6:04 pm Need to tweak your formula for interest paid in the year a bond matures. Bonds that have a maturity date before June will only make the one interest payment at maturity while those that after June 1 will make two.
That's why I mentioned approximate and twice yearly interest

The annual differences are well under 1%.
Topic Author
exodusing
Posts: 820
Joined: Thu Oct 13, 2022 7:32 am

watchnerd wrote: Wed May 24, 2023 6:25 pm I don't even bother calculating the interest payments given how low the coupon rates are right now.

I just pay attention to the non-rolling rungs maturing every 6 months.
The interest payments are a significant part of total income, especially in the early years, if you have a long ladder. See the real interest column in https://www.tipsladder.com/build?bondCh ... come=10000. Click the show details button. Interest is over 1/3 of income in the first year. If you have a short ladder, interest is much less significant. You must have a short ladder if you have only 6 month rungs.
watchnerd
Posts: 11067
Joined: Sat Mar 03, 2007 10:18 am
Location: Seattle, WA, USA