Now that long TIPS yields are 60 bp off their highs I will…

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
protagonist
Posts: 9184
Joined: Sun Dec 26, 2010 11:47 am

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by protagonist »

Kevin M wrote: Fri Feb 09, 2024 2:54 pm

My intention is to split each year evenly between Jan and Jul issues for 2028 - 2034; I entered 0.5 for each of these maturities in #Cruncher's ladder spreadsheet.
I thought you were overweighting 2034 and 2040?
protagonist
Posts: 9184
Joined: Sun Dec 26, 2010 11:47 am

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by protagonist »

nedsaid wrote: Sat Feb 10, 2024 12:20 pm The Real Yield on US TIPS have been climbing in 2024, not by big amounts but still up. From January 1st through February 9th, here they are. The source is Daily Treasury Par Real Yield Curve Rates on the U.S. Treasury Department website.

Five year from 1.76% to 1.86%
Seven year from 1.75% to 1.89%.
Ten Year from 1.74% to 1.92%.
Twenty Year from 1.84% to 2.05%.
Thirty Year from 1.91% to 2.13%.

Note that nominal yields on US Treasuries have been rising in 2024 as well.

Five year from 3.93% to 4.14%
Seven year from 3.95% to 4.17%.
Ten Year from 3.95% to 4.17%.
Twenty Year from 4.25% to 4.48%.
Thirty Year from 4.08% to 4.37%.

Source is Daily Treasury Par Yield Curve Rates on the U.S. Treasury Department website.

Looks to me there is still opportunity to lock in attractive positive real yields on TIPS.
I think there are two opposing forces here (correct me if I am wrong):
1. Interest rates have likely reached or are near their highs, inflation is probably pretty much under control, and the Fed. plans to start cutting rates this year- this suggests a tendency towards declining TIPS yields going forward.
2. The USA still has a massive amount of debt that it needs to sell off, and that should not resolve any time soon. This could account for persistent high yields in years to come.
So, the bottom line is, it is difficult to predict the future of TIPS yields.
User avatar
nedsaid
Posts: 19177
Joined: Fri Nov 23, 2012 11:33 am

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by nedsaid »

protagonist wrote: Sat Feb 10, 2024 11:54 pm
nedsaid wrote: Sat Feb 10, 2024 12:20 pm The Real Yield on US TIPS have been climbing in 2024, not by big amounts but still up. From January 1st through February 9th, here they are. The source is Daily Treasury Par Real Yield Curve Rates on the U.S. Treasury Department website.

Five year from 1.76% to 1.86%
Seven year from 1.75% to 1.89%.
Ten Year from 1.74% to 1.92%.
Twenty Year from 1.84% to 2.05%.
Thirty Year from 1.91% to 2.13%.

Note that nominal yields on US Treasuries have been rising in 2024 as well.

Five year from 3.93% to 4.14%
Seven year from 3.95% to 4.17%.
Ten Year from 3.95% to 4.17%.
Twenty Year from 4.25% to 4.48%.
Thirty Year from 4.08% to 4.37%.

Source is Daily Treasury Par Yield Curve Rates on the U.S. Treasury Department website.

Looks to me there is still opportunity to lock in attractive positive real yields on TIPS.
I think there are two opposing forces here (correct me if I am wrong):
1. Interest rates have likely reached or are near their highs, inflation is probably pretty much under control, and the Fed. plans to start cutting rates this year- this suggests a tendency towards declining TIPS yields going forward.
2. The USA still has a massive amount of debt that it needs to sell off, and that should not resolve any time soon. This could account for persistent high yields in years to come.
So, the bottom line is, it is difficult to predict the future of TIPS yields.
Your analysis is good and I am in substantial agreement. I would further say that interest rates right now are entirely normal, what I would have expected in a pre-Great Financial Crisis environment. I saw these kind of rates during my investing career until late 2008, when the Fed essentially cut short term rates to almost zero. Good to see interest rates normalize and let savers actually make good interest on their deposits.
A fool and his money are good for business.
MishkaWorries
Posts: 1329
Joined: Wed Aug 14, 2019 4:39 pm

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by MishkaWorries »

protagonist wrote: Sat Feb 10, 2024 11:54 pm
Looks to me the

I think there are two opposing forces here (correct me if I am wrong):
1. Interest rates have likely reached or are near their highs, inflation is probably pretty much under control, and the Fed. plans to start cutting rates this year- this suggests a tendency towards declining TIPS yields going forward.
2. The USA still has a massive amount of debt that it needs to sell off, and that should not resolve any time soon. This could account for persistent high yields in years to come.
So, the bottom line is, it is difficult to predict the future of TIPS yields.
I'm not understanding number 2. If there is large amount of debt that needs to paid off, wouldn't that indicate a desire by the government or Fed to lower interest rates and let inflation lower the value of the debt?
We plan. G-d laughs.
User avatar
nedsaid
Posts: 19177
Joined: Fri Nov 23, 2012 11:33 am

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by nedsaid »

MishkaWorries wrote: Sun Feb 11, 2024 12:23 am
protagonist wrote: Sat Feb 10, 2024 11:54 pm
Looks to me the

I think there are two opposing forces here (correct me if I am wrong):
1. Interest rates have likely reached or are near their highs, inflation is probably pretty much under control, and the Fed. plans to start cutting rates this year- this suggests a tendency towards declining TIPS yields going forward.
2. The USA still has a massive amount of debt that it needs to sell off, and that should not resolve any time soon. This could account for persistent high yields in years to come.
So, the bottom line is, it is difficult to predict the future of TIPS yields.
I'm not understanding number 2. If there is large amount of debt that needs to paid off, wouldn't that indicate a desire by the government or Fed to lower interest rates and let inflation lower the value of the debt?
The Reagan administration and years later the Obama administration ran high deficits and interest rates did nothing but fall. In my college economics courses, the instructor said that historically there was no relationship between the level of interest rates and the size of deficits. Economics and finance can be counter-intuitive and this is one example. Economies are very complex things and a lot of factors are at work that determine interest rates.

After World War II, the United States both grew and inflated our way out of debt. My father said that War Bonds purchased for him by his Grandfather lost about half of their purchasing power during the time they were held. James Stowers, founder of American Century Investments, told a similar story in one of his books.
A fool and his money are good for business.
User avatar
Svensk Anga
Posts: 1572
Joined: Sun Dec 23, 2012 4:16 pm

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by Svensk Anga »

protagonist wrote: Sat Feb 10, 2024 11:54 pm
nedsaid wrote: Sat Feb 10, 2024 12:20 pm The Real Yield on US TIPS have been climbing in 2024, not by big amounts but still up. From January 1st through February 9th, here they are. The source is Daily Treasury Par Real Yield Curve Rates on the U.S. Treasury Department website.

Five year from 1.76% to 1.86%
Seven year from 1.75% to 1.89%.
Ten Year from 1.74% to 1.92%.
Twenty Year from 1.84% to 2.05%.
Thirty Year from 1.91% to 2.13%.

Note that nominal yields on US Treasuries have been rising in 2024 as well.

Five year from 3.93% to 4.14%
Seven year from 3.95% to 4.17%.
Ten Year from 3.95% to 4.17%.
Twenty Year from 4.25% to 4.48%.
Thirty Year from 4.08% to 4.37%.

Source is Daily Treasury Par Yield Curve Rates on the U.S. Treasury Department website.

Looks to me there is still opportunity to lock in attractive positive real yields on TIPS.
I think there are two opposing forces here (correct me if I am wrong):
1. Interest rates have likely reached or are near their highs, inflation is probably pretty much under control, and the Fed. plans to start cutting rates this year- this suggests a tendency towards declining TIPS yields going forward.
2. The USA still has a massive amount of debt that it needs to sell off, and that should not resolve any time soon. This could account for persistent high yields in years to come.
So, the bottom line is, it is difficult to predict the future of TIPS yields.
I have my doubts about #1 above with regards to rate cuts. I recall for years, pre-crisis, pre-tech crash, that I got 5% or so on money market funds. Maybe the neutral rate turns out to be in that ballpark. The Fed may not want to spook markets by saying that. It seems that the economy is doing well despite the current "high" interest rate. It could be a long road to 2% target inflation if we don't get a recession near term.

If the short term rate settles out near 5% and we get a normal positively sloped yield curve, that suggests that better long rates are ahead.
User avatar
nedsaid
Posts: 19177
Joined: Fri Nov 23, 2012 11:33 am

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by nedsaid »

I didn't want to get into a big economic discussion here but wanted to say that real yields on TIPS are still attractive. Wasn't too long ago that real yields hovered just below or just above zero. I went to the US Treasury website and saw that real rates for Intermediate TIPS were about a negative 1.4% in 2021, today they are more like a positive 1.8%. I haven't purchased more TIPS for a while but I am thinking about it.
A fool and his money are good for business.
IDpilot
Posts: 240
Joined: Sat Dec 05, 2020 7:13 am

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by IDpilot »

nedsaid wrote: Sun Feb 11, 2024 9:57 am I ... wanted to say that real yields on TIPS are still attractive.
And that's what really matters. If the rates offered today work in your plan, then buy. If not, don't.
User avatar
Kevin M
Posts: 15630
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by Kevin M »

protagonist wrote: Sat Feb 10, 2024 11:44 pm
Kevin M wrote: Fri Feb 09, 2024 2:54 pm My intention is to split each year evenly between Jan and Jul issues for 2028 - 2034; I entered 0.5 for each of these maturities in #Cruncher's ladder spreadsheet.
I thought you were overweighting 2034 and 2040?
Good catch! This sentence should have referred to 2028-2033. For Jan 2034 and 2040 I've entered 3.5 as the multiplier in the #Cruncher ladder spreadsheet.

Currently I hold 18% of what I need for 2034 and 25% of what I need for 2040. By comparison, I hold 65% of what I need for Jan 2033, and 33% of what I need for all of 2033 (Jan and Jul).

For the entire ladder, I own 53% of the number of TIPS I need if I only count what I need for the maturities through 2027 as holdings (I hold much more than that for these maturities), and 52% of the total cost based on Friday's prices. That's what I mean by "a long way to go".
If I make a calculation error, #Cruncher probably will let me know.
User avatar
Kevin M
Posts: 15630
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by Kevin M »

nedsaid wrote: Sun Feb 11, 2024 9:57 am I didn't want to get into a big economic discussion here but wanted to say that real yields on TIPS are still attractive. Wasn't too long ago that real yields hovered just below or just above zero. I went to the US Treasury website and saw that real rates for Intermediate TIPS were about a negative 1.4% in 2021, today they are more like a positive 1.8%. I haven't purchased more TIPS for a while but I am thinking about it.
Here's all yield history available for the 10y constant maturity real yield:

Image

So yeah, attractive now at 1.9% compared to negative yields in 2021. More attractive since anytime since Feb 2009 at 2.06%. Not as attractive as the peak at 2.52% on Oct 25, 2023. Note that this thread has been going since Sep 18, 2022, when the 10y real CMT yield was 1.07% (on Friday 9/16/2022):

Image

Here is the TIPS yield curve as of sometime on Friday, based on Schwab quotes:

Image

The only TIPS ask yields that are close to 1.8% are the Jul 2028, 2029 and 2030, but we really need to seasonally adjust those yields to compare them rationally to other similar TIPS maturities, which are closer to 1.9%, and after seasonally adjusting them all and applying additional curve smoothing factors, we're looking at 1.92-1.98% for Jul 2028 through Jul 2030, with the higher yields at the shorter maturities.

Regarding these being normal yields, the yield curve most assuredly is not normal, with large inversion at the short end. Ditto for nominal Treasuries:

Image
If I make a calculation error, #Cruncher probably will let me know.
Whakamole
Posts: 1760
Joined: Wed Jan 13, 2016 8:59 pm

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by Whakamole »

nedsaid wrote: Sun Feb 11, 2024 12:32 am
MishkaWorries wrote: Sun Feb 11, 2024 12:23 am
protagonist wrote: Sat Feb 10, 2024 11:54 pm
Looks to me the

I think there are two opposing forces here (correct me if I am wrong):
1. Interest rates have likely reached or are near their highs, inflation is probably pretty much under control, and the Fed. plans to start cutting rates this year- this suggests a tendency towards declining TIPS yields going forward.
2. The USA still has a massive amount of debt that it needs to sell off, and that should not resolve any time soon. This could account for persistent high yields in years to come.
So, the bottom line is, it is difficult to predict the future of TIPS yields.
I'm not understanding number 2. If there is large amount of debt that needs to paid off, wouldn't that indicate a desire by the government or Fed to lower interest rates and let inflation lower the value of the debt?
The Reagan administration and years later the Obama administration ran high deficits and interest rates did nothing but fall. In my college economics courses, the instructor said that historically there was no relationship between the level of interest rates and the size of deficits. Economics and finance can be counter-intuitive and this is one example. Economies are very complex things and a lot of factors are at work that determine interest rates.

After World War II, the United States both grew and inflated our way out of debt. My father said that War Bonds purchased for him by his Grandfather lost about half of their purchasing power during the time they were held. James Stowers, founder of American Century Investments, told a similar story in one of his books.
This is a good reason to prefer TIPS over nominals. TIPS would have kept their purchasing power, assuming there weren't hijinks on actual inflation numbers.
guppyguy
Posts: 458
Joined: Tue Jan 30, 2018 3:24 pm

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by guppyguy »

Off the wall question, where are most people reinvesting individual TIPS interest payments and why? The assumption is one is still 10-15 years from the first rung maturing.
AQ
Posts: 880
Joined: Mon Feb 25, 2008 10:38 pm

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by AQ »

I have some limit order for LTPZ at 54.4; so far it was close but not yet filled..

I planned to start getting some individual TIPS in 2024; but the headache due to tax issues with a couple of Tbonds from secondary market made me pause for the time being now.
User avatar
Svensk Anga
Posts: 1572
Joined: Sun Dec 23, 2012 4:16 pm

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by Svensk Anga »

guppyguy wrote: Sun Feb 11, 2024 3:53 pm Off the wall question, where are most people reinvesting individual TIPS interest payments and why? The assumption is one is still 10-15 years from the first rung maturing.
I've been buying LTPZ lately. The plan is to use the coupon payments to buy additional rungs to my 20-year ladder. My average coupon rate is about 0.8% so the ladder wont be getting much longer via this route. I am retired and have a rung maturing next year.
protagonist
Posts: 9184
Joined: Sun Dec 26, 2010 11:47 am

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by protagonist »

guppyguy wrote: Sun Feb 11, 2024 3:53 pm Off the wall question, where are most people reinvesting individual TIPS interest payments and why? The assumption is one is still 10-15 years from the first rung maturing.
They go into my core account.
When I have enough spare cash there I invest in more TIPS in my ladder.
(My first rung of my current ladder matures this April. I don't know why you would assume a 10-15 year wait.)
User avatar
Kevin M
Posts: 15630
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by Kevin M »

guppyguy wrote: Sun Feb 11, 2024 3:53 pm Off the wall question, where are most people reinvesting individual TIPS interest payments and why? The assumption is one is still 10-15 years from the first rung maturing.
I'm not 10-15 years from first the rung maturing, so my situation is different. I had to look at my transaction history to see what I did with my Jan 15 interest payments. It was complicated by having some Jan 15 2024 TIPS mature on the same day.

Since I knew the TIPS were maturing on Monday Jan 15, I bought various TIPS on Friday Jan 12, knowing the Schwab would factor the proceeds from the maturing TIPS into what I could buy; the total of these TIPS was just slightly shy of what I knew the maturing proceeds would be. I completely forgot about interest payments. Jan 15 was a holiday, so everything settled on Jan 16. On Jan 16 I bought shares of SWVXX (MM fund) with the available balance, which was all of the TIPS interest except for the Jan 2025, which for some reason didn't show up in the available balance until Jan 17, when I used it to buy more SWVXX.

On subsequent days I sold some of my Apr 2024s and bought some longer maturities with the proceeds. For some of these trades, the purchase amount exceeded the sales proceeds, so I sold shares of SWVXX to cover the extra. I currently have $9 in SWVXX, so essentially all of the TIPS interest went into buying more TIPS.

If I were 10-15 years from the first rung maturing, what I did would depend on how much interest it was. If it were enough to buy at least one more TIPS, I'd do that, and I'd put whatever was left over into a TIPS fund--probably LTPZ. If less than $1K or so, I'd probably just put it into the fund. If I got to the point where the LTPZ duration was longer than I wanted, I'd probably sell most of the LTPZ and buy more individual TIPS for the ladder.
If I make a calculation error, #Cruncher probably will let me know.
Praye
Posts: 73
Joined: Thu Sep 28, 2023 5:13 pm

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by Praye »

Kevin M wrote: Mon Feb 12, 2024 2:42 pm If I were 10-15 years from the first rung maturing, what I did would depend on how much interest it was. If it were enough to buy at least one more TIPS, I'd do that, and I'd put whatever was left over into a TIPS fund--probably LTPZ. If less than $1K or so, I'd probably just put it into the fund. If I got to the point where the LTPZ duration was longer than I wanted, I'd probably sell most of the LTPZ and buy more individual TIPS for the ladder.
I was considering putting all my pre-ladder interest into the iShares iBond defined maturity TIPS ETF for the target year (2031), which should result in enough income to cover 2031 needs. I'm unsure if that would end up being a more expensive method than you are suggesting, after accounting for the expense ratio and the bid-ask spread.
User avatar
Kevin M
Posts: 15630
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by Kevin M »

As I've posted in another thread, both stocks and bonds are down today, I'm guessing because of a higher than expected CPI print. The consequence relevant to this thread is that TIPS yields are up.

I bought some 2034s earlier today (and 2029s for DW), and after yields increased further, bought some 2040s; filling in the gap-year coverage. Most purchases funded by sales of Apr 2024s, but I sold a few of the 4/15/2024 nominal Ts that I had in my IRA for some reason, probably for a horse race comparison with the Apr 2024 TIPS.

High yield at Schwab now is 2.243% for the 2048, followed by 2.241% for the 2046, and this are all for min qty 1 at Schwab.

The 2034 now is 2.014% (min qty 1); remember that auction yield of 1.81%? The 2040 is 2.132%.

All best price/yield ask quotes at Schwab are for min qty 1, except for the 2044 .

Oh, and we'll be getting inflation adjustments totaling 0.54% in March, after -0.10% for Feb (and also negative for Dec and Jan).
If I make a calculation error, #Cruncher probably will let me know.
AQ
Posts: 880
Joined: Mon Feb 25, 2008 10:38 pm

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by AQ »

Real yields rising again and already loaded up some LTPZ. Very tempted to dip into individual TIPS. Some tax questions:

If I buy TIPS on secondary market, and hold it to maturity. Which of the following true?
a) Broker issues a 1099-int; both coupons and inflation adjustment go to Box 3?
b) Broker issues a 1099-div; both coupons and inflation adjustment go to Box 1a?
c) do I need to deal with an Accrued Market Discount annually? (the difference between purchase price and par)

I guess I figured out dealing with tax issues with a nominal treasury bonds; what differences for tax filing between a nominal and TIPS? When will Kevin start a thread about TIPS? :-D
User avatar
Kevin M
Posts: 15630
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by Kevin M »

Praye wrote: Tue Feb 13, 2024 2:13 pm
Kevin M wrote: Mon Feb 12, 2024 2:42 pm If I were 10-15 years from the first rung maturing, what I did would depend on how much interest it was. If it were enough to buy at least one more TIPS, I'd do that, and I'd put whatever was left over into a TIPS fund--probably LTPZ. If less than $1K or so, I'd probably just put it into the fund. If I got to the point where the LTPZ duration was longer than I wanted, I'd probably sell most of the LTPZ and buy more individual TIPS for the ladder.
I was considering putting all my pre-ladder interest into the iShares iBond defined maturity TIPS ETF for the target year (2031), which should result in enough income to cover 2031 needs. I'm unsure if that would end up being a more expensive method than you are suggesting, after accounting for the expense ratio and the bid-ask spread.
Interesting. The ER is 0.10%, and you pay that each year, so that's about 0.7% for seven years.

The price bid/ask spread for the 2031 at Schwab today was 0.02%. Assuming that the midpoint is the fair price, you pay half of that, or 0.01% (the seller pays the other half), and you pay that once.

The ER for LTPZ is 0.20%, so twice that of the bullet ETF.

If my goal was to own the 2031, I might put my coupons into the 2031 bullet ETF, and then when I'd accumulated enough to buy one 2031 TIPS, I'd sell shares of the fund and buy the TIPS. This matches the duration of the fund to that of the TIPS you want to own eventually. This would work well at Schwab due to their excellent pricing for min qty 1.
If I make a calculation error, #Cruncher probably will let me know.
Topic Author
McQ
Posts: 1389
Joined: Fri Jun 18, 2021 12:21 am
Location: California

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by McQ »

The 204x TIPS did not quite hit 2.25% today, but close enough for government work. With my personal trigger point reached I put another $10,000 into LTPZ.
I wonder if I'll get another chance to buy at >2.30%? Here's hoping; I have maybe $20K left of nominal bonds that could be cracked out of Wellington.
After that point, at $50K above my notional target of $400K, and all my nominal bonds liquidated, I would need to see the 2040s get above 2.5% once more, before beginning to liquidate some of my TIAA Traditional, where older vintages weigh down the overall rate, probably still under 5% after the March update, and the loyalty bonus is not large ...
Unlikely, but good to have a plan, just in case.
You can take the academic out of the classroom by retirement, but you can't ever take the classroom out of his tone, style, and manner of approach.
User avatar
Kevin M
Posts: 15630
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by Kevin M »

AQ wrote: Tue Feb 13, 2024 4:23 pm Real yields rising again and already loaded up some LTPZ. Very tempted to dip into individual TIPS. Some tax questions:

If I buy TIPS on secondary market, and hold it to maturity. Which of the following true?
a) Broker issues a 1099-int; both coupons and inflation adjustment go to Box 3?
b) Broker issues a 1099-div; both coupons and inflation adjustment go to Box 1a?
c) do I need to deal with an Accrued Market Discount annually? (the difference between purchase price and par)

I guess I figured out dealing with tax issues with a nominal treasury bonds; what differences for tax filing between a nominal and TIPS? When will Kevin start a thread about TIPS? :-D
I recommend that you ask this question in the thread I started about 15 months ago dedicated to the topic: Taxation of Treasury bills, notes and bonds - Bogleheads.org. It covers all types of Treasuries, including TIPS. Well, first look for the answer in that thread, and then ask any remaining questions. At least part of the answer is in the OP of that thread.
If I make a calculation error, #Cruncher probably will let me know.
AQ
Posts: 880
Joined: Mon Feb 25, 2008 10:38 pm

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by AQ »

McQ wrote: Tue Feb 13, 2024 4:27 pm The 204x TIPS did not quite hit 2.25% today, but close enough for government work. With my personal trigger point reached I put another $10,000 into LTPZ.
I wonder if I'll get another chance to buy at >2.30%? Here's hoping; I have maybe $20K left of nominal bonds that could be cracked out of Wellington.
After that point, at $50K above my notional target of $400K, and all my nominal bonds liquidated, I would need to see the 2040s get above 2.5% once more, before beginning to liquidate some of my TIAA Traditional, where older vintages weigh down the overall rate, probably still under 5% after the March update, and the loyalty bonus is not large ...
Unlikely, but good to have a plan, just in case.
Thanks for the update. I started trading LTPZ by following this thread. It would be more operational to follow your trades if you could list corresponding LTPZ, say, 2.25% (roughly ltpz=94.2?)

I recall you provided a correspondence between LTPZ prices and real yields previously. One question is: does this correspondence hold stable over time? For example, you mentioned LTPZ < $55 is an attractive price point for you that you'll use coupon payments to purchase more shares. $55 probably corresponds to real yield 2% more or less. Is this relation quite different in the future?
Praye
Posts: 73
Joined: Thu Sep 28, 2023 5:13 pm

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by Praye »

Kevin M wrote: Tue Feb 13, 2024 4:24 pm
Praye wrote: Tue Feb 13, 2024 2:13 pm
Kevin M wrote: Mon Feb 12, 2024 2:42 pm If I were 10-15 years from the first rung maturing, what I did would depend on how much interest it was. If it were enough to buy at least one more TIPS, I'd do that, and I'd put whatever was left over into a TIPS fund--probably LTPZ. If less than $1K or so, I'd probably just put it into the fund. If I got to the point where the LTPZ duration was longer than I wanted, I'd probably sell most of the LTPZ and buy more individual TIPS for the ladder.
I was considering putting all my pre-ladder interest into the iShares iBond defined maturity TIPS ETF for the target year (2031), which should result in enough income to cover 2031 needs. I'm unsure if that would end up being a more expensive method than you are suggesting, after accounting for the expense ratio and the bid-ask spread.
Interesting. The ER is 0.10%, and you pay that each year, so that's about 0.7% for seven years.

The price bid/ask spread for the 2031 at Schwab today was 0.02%. Assuming that the midpoint is the fair price, you pay half of that, or 0.01% (the seller pays the other half), and you pay that once.

The ER for LTPZ is 0.20%, so twice that of the bullet ETF.

If my goal was to own the 2031, I might put my coupons into the 2031 bullet ETF, and then when I'd accumulated enough to buy one 2031 TIPS, I'd sell shares of the fund and buy the TIPS. This matches the duration of the fund to that of the TIPS you want to own eventually. This would work well at Schwab due to their excellent pricing for min qty 1.
Thank you for framing it in this way, it will help me make my decision. I do use Schwab.

I can see how using IBIH as a "placeholder" until I have enough accrued to buy a 2031 TIPS would save money (expense ratio). I guess the trade off would be the bid-ask spreads being incurred more often as I exited IBIH to buy TIPS? I believe the median 30 day spread is .08.

Would you say that IBIH does a better job of matching my duration than a shorter duration fund like VTIP? Not sure if there is a TIPS fund with closer to a 3.5 average duration.
Lyrrad
Posts: 835
Joined: Sun Jul 27, 2008 10:59 am

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by Lyrrad »

Praye wrote: Tue Feb 13, 2024 6:11 pm
Thank you for framing it in this way, it will help me make my decision. I do use Schwab.

I can see how using IBIH as a "placeholder" until I have enough accrued to buy a 2031 TIPS would save money (expense ratio). I guess the trade off would be the bid-ask spreads being incurred more often as I exited IBIH to buy TIPS? I believe the median 30 day spread is .08.

Would you say that IBIH does a better job of matching my duration than a shorter duration fund like VTIP? Not sure if there is a TIPS fund with closer to a 3.5 average duration.
I feel that if the accumulated fund is less than a single $1000 face value bond, then it probably doesn't matter that much which TIPS fund you use to invest the coupon payments.

I'd been putting some of my TIPS allocation into a DIPSX Trust wrapper (0.11% ER), for rebalancing purposes, since I prefer not to sell my individual TIPS holdings.

I just found SWRSX (0.05% ER) which is a similar Schwab fund. I'll probably switch to that since it has a lower expense ratio and it's easier for me to use. With a duration of 6.5 years it should have similar performance to a 2031 TIPS for a few years.

I like using mutual funds since I don't have to deal with bid-ask spreads, fractional ETF shares, or waiting two days for settlement. (Though ETFs should match the T+1 settlement of Treasuries and mutual funds in a few months.)

The fund may distribute some capital gains. (I ignore those since I use a tax-advantaged account.)
Topic Author
McQ
Posts: 1389
Joined: Fri Jun 18, 2021 12:21 am
Location: California

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by McQ »

AQ wrote: Tue Feb 13, 2024 5:41 pm
McQ wrote: Tue Feb 13, 2024 4:27 pm The 204x TIPS did not quite hit 2.25% today, but close enough for government work. With my personal trigger point reached I put another $10,000 into LTPZ.
I wonder if I'll get another chance to buy at >2.30%? Here's hoping; I have maybe $20K left of nominal bonds that could be cracked out of Wellington.
After that point, at $50K above my notional target of $400K, and all my nominal bonds liquidated, I would need to see the 2040s get above 2.5% once more, before beginning to liquidate some of my TIAA Traditional, where older vintages weigh down the overall rate, probably still under 5% after the March update, and the loyalty bonus is not large ...
Unlikely, but good to have a plan, just in case.
Thanks for the update. I started trading LTPZ by following this thread. It would be more operational to follow your trades if you could list corresponding LTPZ, say, 2.25% (roughly ltpz=94.2?)

I recall you provided a correspondence between LTPZ prices and real yields previously. One question is: does this correspondence hold stable over time? For example, you mentioned LTPZ < $55 is an attractive price point for you that you'll use coupon payments to purchase more shares. $55 probably corresponds to real yield 2% more or less. Is this relation quite different in the future?
alas, LTPZ price and 204x yields only track over short periods; dividends screw it up over multiple months. Today's purchase was at 54.28 on LTPZ, but I think it is more informative to say "when 204x yields touched 2.25%"

Also, if your brokerage is like mine (Schwab), the "cost basis" counts dividend payments in cost. Perfectly appropriate in a taxable account, less so here in tax-deferred, when all those dividends added into cost are in fact, gains.
You can take the academic out of the classroom by retirement, but you can't ever take the classroom out of his tone, style, and manner of approach.
Praye
Posts: 73
Joined: Thu Sep 28, 2023 5:13 pm

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by Praye »

Lyrrad wrote: Tue Feb 13, 2024 7:49 pm
Praye wrote: Tue Feb 13, 2024 6:11 pm
Thank you for framing it in this way, it will help me make my decision. I do use Schwab.

I can see how using IBIH as a "placeholder" until I have enough accrued to buy a 2031 TIPS would save money (expense ratio). I guess the trade off would be the bid-ask spreads being incurred more often as I exited IBIH to buy TIPS? I believe the median 30 day spread is .08.

Would you say that IBIH does a better job of matching my duration than a shorter duration fund like VTIP? Not sure if there is a TIPS fund with closer to a 3.5 average duration.
I feel that if the accumulated fund is less than a single $1000 face value bond, then it probably doesn't matter that much which TIPS fund you use to invest the coupon payments.

I'd been putting some of my TIPS allocation into a DIPSX Trust wrapper (0.11% ER), for rebalancing purposes, since I prefer not to sell my individual TIPS holdings.

I just found SWRSX (0.05% ER) which is a similar Schwab fund. I'll probably switch to that since it has a lower expense ratio and it's easier for me to use. With a duration of 6.5 years it should have similar performance to a 2031 TIPS for a few years.

I like using mutual funds since I don't have to deal with bid-ask spreads, fractional ETF shares, or waiting two days for settlement. (Though ETFs should match the T+1 settlement of Treasuries and mutual funds in a few months.)

The fund may distribute some capital gains. (I ignore those since I use a tax-advantaged account.)
That is interesting about SWRSX, thank you. I use Schwab so when I'm using mutual funds I try to use theirs to avoid the $75 trading fee. And I am also not worried about cap gains in this account.

I'm new to all this, but I thought you were supposed to use a fund with about half the average duration of your target duration? So for a liability 7 years in the future, you would prefer a fund with a 3.5 year average duration.... there must be something I'm not understanding in this?

You mention that you don't prefer to sell your individual TIPS for rebalancing. Most of my TIPS are part of an LMP that I will also not want to sell off. However I do also have some individual TIPS outside my LMP (couldn't resist the 2+% yields), that I was hoping to be able to sell for rebalancing in my Risk Portfolio. Do you think I will encounter difficulty doing so? Just interested in your experience, thank you!
User avatar
Kevin M
Posts: 15630
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by Kevin M »

Praye wrote: Wed Feb 14, 2024 4:03 pm I'm new to all this, but I thought you were supposed to use a fund with about half the average duration of your target duration? So for a liability 7 years in the future, you would prefer a fund with a 3.5 year average duration.... there must be something I'm not understanding in this?
I think the idea is that if you had annual liabilities evenly spread over the next 7 years that the average duration of the liabilities would be about 3.5 years. If you have a real liability in 7 years, the best match is a TIPS maturing in 7 years. An alternative might be a TIPS ETF that matures in about 7 years, like iShares® iBonds® Oct 2031 Term TIPS ETF | IBIH. Despite the name of the ETF, it holds the Jan and Jul 2031 TIPS--there is no Oct 2031 TIPS. In recent years there have been 5y TIPS auctions in Oct and Apr; I assume the fund will add the Apr and Oct 2031 TIPS if they are auctioned in 2026.
Praye wrote: Wed Feb 14, 2024 4:03 pmYou mention that you don't prefer to sell your individual TIPS for rebalancing. Most of my TIPS are part of an LMP that I will also not want to sell off. However I do also have some individual TIPS outside my LMP (couldn't resist the 2+% yields), that I was hoping to be able to sell for rebalancing in my Risk Portfolio. Do you think I will encounter difficulty doing so? Just interested in your experience, thank you!
You were asking someone else, but I've been selling TIPS almost daily, lately my Apr 2024s, to buy longer maturity TIPS for my ladder. Did one of those trades today to buy some 2040s at 2.08%. So normally, it's not a problem.

Currently Schwab is not trading the Jul 2024 TIPS for some reason, so if something like that happens, it may be a problem. At some point I'll probably call the fixed income desk to find out what the issue is. Once I sell all of my Apr 2024s, I may want to start selling my Jul 2024s to continue filling out my ladder.

In late 2008 there was a TIPS liquidity crisis associated with the Lehman failure. While nominal Treasury prices went up, so were good for rebalancing into the stocks that were crashing, TIPS prices went down due to the liquidity crunch, so not so good for rebalancing at that time (a good time to buy TIPS though).
If I make a calculation error, #Cruncher probably will let me know.
Praye
Posts: 73
Joined: Thu Sep 28, 2023 5:13 pm

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by Praye »

Kevin M wrote: Thu Feb 15, 2024 12:06 pm
Praye wrote: Wed Feb 14, 2024 4:03 pm I'm new to all this, but I thought you were supposed to use a fund with about half the average duration of your target duration? So for a liability 7 years in the future, you would prefer a fund with a 3.5 year average duration.... there must be something I'm not understanding in this?
I think the idea is that if you had annual liabilities evenly spread over the next 7 years that the average duration of the liabilities would be about 3.5 years. If you have a real liability in 7 years, the best match is a TIPS maturing in 7 years. An alternative might be a TIPS ETF that matures in about 7 years, like iShares® iBonds® Oct 2031 Term TIPS ETF | IBIH. Despite the name of the ETF, it holds the Jan and Jul 2031 TIPS--there is no Oct 2031 TIPS. In recent years there have been 5y TIPS auctions in Oct and Apr; I assume the fund will add the Apr and Oct 2031 TIPS if they are auctioned in 2026.
Ah! You have made it very clear to me, thank you.
Praye wrote: Wed Feb 14, 2024 4:03 pmYou mention that you don't prefer to sell your individual TIPS for rebalancing. Most of my TIPS are part of an LMP that I will also not want to sell off. However I do also have some individual TIPS outside my LMP (couldn't resist the 2+% yields), that I was hoping to be able to sell for rebalancing in my Risk Portfolio. Do you think I will encounter difficulty doing so? Just interested in your experience, thank you!
Kevin M wrote: Thu Feb 15, 2024 12:06 pm You were asking someone else, but I've been selling TIPS almost daily, lately my Apr 2024s, to buy longer maturity TIPS for my ladder. Did one of those trades today to buy some 2040s at 2.08%. So normally, it's not a problem.

Currently Schwab is not trading the Jul 2024 TIPS for some reason, so if something like that happens, it may be a problem. At some point I'll probably call the fixed income desk to find out what the issue is. Once I sell all of my Apr 2024s, I may want to start selling my Jul 2024s to continue filling out my ladder.

In late 2008 there was a TIPS liquidity crisis associated with the Lehman failure. While nominal Treasury prices went up, so were good for rebalancing into the stocks that were crashing, TIPS prices went down due to the liquidity crunch, so not so good for rebalancing at that time (a good time to buy TIPS though).
Yes, I've seen some mention on the forum of TIPS being less liquid, exactly what made me wonder about the wisdom of having TIPS in my RP. Surely if I don't let my RP fixed income get over 50% TIPS, I would still be ok.

So when you are selling TIPS (or any bond really) to rebalance into stocks, are you influenced by the gain/loss you are realizing on the bond? If all you have are bonds with only very low annualized gain, or even slight loss, should you postpone rebalancing until that changes?
User avatar
Kevin M
Posts: 15630
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by Kevin M »

Praye wrote: Thu Feb 15, 2024 1:57 pm So when you are selling TIPS (or any bond really) to rebalance into stocks, are you influenced by the gain/loss you are realizing on the bond? If all you have are bonds with only very low annualized gain, or even slight loss, should you postpone rebalancing until that changes?
This might be veering too much off topic, but what people hope for is that bond prices go up when stock prices go down. This has been the case in deflationary bear markets, but was not the case in the most recent inflationary stock downturn.

I don't think most people are going to pay much attention to a relatively small percentage gain or loss on bonds when rebalancing into stocks during big stock declines. It was more difficult when there were large declines in both stocks and bonds more recently.

A typical policy is to rebalance when your asset allocations deviate from target by a certain amount. That will tend to be driven by gains and losses, but the gains and losses themselves are not what we focus on. For example, if stocks and bonds both go up, but stocks go up by a lot more, we'll rebalance from stocks to bonds. If they both go down, but stocks go down a lot more, we'll rebalance from bonds to stocks.
If I make a calculation error, #Cruncher probably will let me know.
Praye
Posts: 73
Joined: Thu Sep 28, 2023 5:13 pm

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by Praye »

Kevin M wrote: Thu Feb 15, 2024 2:59 pm
Praye wrote: Thu Feb 15, 2024 1:57 pm So when you are selling TIPS (or any bond really) to rebalance into stocks, are you influenced by the gain/loss you are realizing on the bond? If all you have are bonds with only very low annualized gain, or even slight loss, should you postpone rebalancing until that changes?
This might be veering too much off topic, but what people hope for is that bond prices go up when stock prices go down. This has been the case in deflationary bear markets, but was not the case in the most recent inflationary stock downturn.

I don't think most people are going to pay much attention to a relatively small percentage gain or loss on bonds when rebalancing into stocks during big stock declines. It was more difficult when there were large declines in both stocks and bonds more recently.

A typical policy is to rebalance when your asset allocations deviate from target by a certain amount. That will tend to be driven by gains and losses, but the gains and losses themselves are not what we focus on. For example, if stocks and bonds both go up, but stocks go up by a lot more, we'll rebalance from stocks to bonds. If they both go down, but stocks go down a lot more, we'll rebalance from bonds to stocks.
I see, thank you for replying even though off topic!
protagonist
Posts: 9184
Joined: Sun Dec 26, 2010 11:47 am

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by protagonist »

Kevin M wrote: Thu Feb 15, 2024 12:06 pm
You were asking someone else, but I've been selling TIPS almost daily, lately my Apr 2024s, to buy longer maturity TIPS for my ladder.
I recall that your ladder was initially almost all relatively short term (0-5 year maturities).

Is your ultimate goal to maintain a balanced ladder, evenly covering liabilities from 2024-2033 as well, and overweighting 2034 and 2040 to fill out the missing years?

Also, why are you selling daily, rather than all at once? You could completely build your new ladder in one day and be done with it. Is it because you are hoping that yields will continue to rise?
User avatar
Kevin M
Posts: 15630
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by Kevin M »

protagonist wrote: Tue Feb 20, 2024 11:37 am
Kevin M wrote: Thu Feb 15, 2024 12:06 pm
You were asking someone else, but I've been selling TIPS almost daily, lately my Apr 2024s, to buy longer maturity TIPS for my ladder.
I recall that your ladder was initially almost all relatively short term (0-5 year maturities).

Is your ultimate goal to maintain a balanced ladder, evenly covering liabilities from 2024-2033 as well, and overweighting 2034 and 2040 to fill out the missing years?

Also, why are you selling daily, rather than all at once? You could completely build your new ladder in one day and be done with it. Is it because you are hoping that yields will continue to rise?
Yes, after putting all of my IRA money into TIPS with maturities of five years or less, I decided to build a "real" TIPS ladder covering my expected residual expenses through 2047, so that's what I've been working on.

I kind of drifted into this. I first bought the 2047 because it had the highest yield of all TIPS, and I wanted to get in on that action. Then I bought some other 204Xs for the same reason. Finally I decided building a ladder made sense, especially with most TIPS yields at or above around 2% (although I lowered my threshold to about 1.9%).

To help with this, I started with #Crunchers TIPS ladder spreadsheet, and modified it to use quotes from Schwab, which I download daily anyway. Previously I had modified it to use quotes from Fidelity, but then just as an exercise to prove to myself that I could do it. I also include the settlement date and ref CPI in the imported quotes sheet, and can calculate the index ratios for the TIPS with that and the dated date ref CPIs that #Cruncher provides in his spreadsheet. Bottom line is that I've automated the spreadsheet so no need to copy/paste quotes from WSJ and copy/paste the ref CPI from #Cruncher's eyebonds.info website, or somewhere else.

In #Cruncher's spreadsheet there's a multiplier for each TIPS row that indicates how many of that TIPS to buy for that year of the ladder. For example, if you just want Jan 2028 0.500% TIPS for 2028, you'd enter 1 as the multiplier for that row. I want half in that one and half in the Jul 2028, so I enter 0.5 for each. The sum of the multipliers equals (or should equal) the number of years in your ladder, so for me the sum is 23.

I've entered multipliers of 3.44 and 3.56 for the Jan 2034 and 2040 TIPS respectively, because in another thread I worked out that 2.44X and 2.56X of each matches the durations of the gap year TIPS, given certain assumptions. Here's the resulting table:

Code: Select all

ModDur	Maturity	2033 wt	2040 wt
------	--------	-------	-------
9.78	01/15/35	0.83	0.17
10.59	01/15/36	0.65	0.35
11.37	01/15/37	0.47	0.53
12.04	01/15/38	0.32	0.68
12.78	01/15/39	0.16	0.84
	Sum wts ->	2.44	2.56
The "Sum wts" are what I used to add to 1 for the multipliers for the 2034 and 2040 (e.g., 1 for 2034 and 2.44 for gap years = 3.44). Note that they add to 5--the number of gap years. So given the current yield curve, I'd sell about 80% of the 2034s and 20% of the 2040s to buy the 2035 when it becomes available. I originally had 3.5 for each, and that would be good enough, but hey, since I went to the trouble of working it out, might as well implement it.

I am building the ladder gradually by swapping the first-to-mature TIPS for longer maturity TIPS to minimize regret regardless of what happens to yields. If they go down, I'll be glad I bought some earlier, and if they go up, I'll be glad I didn't buy them all earlier. So far yields generally have been going up since I started, so regret is OK so far.

In my "Apr 2024 TIPS" thread, I posted that I got more than 100 for the sale of my Apr 2024s last week, so more than the maturity price, and this raised the question of why not just do it all now. The only answer is the regret about yield trajectories thing, but I am thinking of accelerating my swaps, especially when TIPS yields increase. Maybe do twice as many each trade. I still need to look at it for today.

Also, even if I sold all of my Apr 2024s, that would get me only about 1/3 of the way to completing the ladder, so I'd need to start selling Jul 2024s next. Guess what? Schwab has not been trading Jul 2024s for at least a week! I need to call them about this, but figured I'd get close to finishing up with the Apr 2024s first. I just looked, and I'll need to sell all of my Apr and Jul 2024s, and a large portion of my Oct 2024s to complete the ladder.

Next, a day or two ago, I realized that my RMDs will be larger than the DARA (desired annual real amount) I used for the ladder. So once I complete my first pass, I'll probably continue rolling shorter maturity TIPS into longer ones. Also, assuming 2% real and 2.5% inflation, my RMDs will increase through 2046, so I might have add increasingly more to later rungs of the ladder.
If I make a calculation error, #Cruncher probably will let me know.
Prudence
Posts: 907
Joined: Fri Mar 09, 2012 3:55 pm

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by Prudence »

Kevin, I have a dozen questions, but I will just go with two:
1. Ultimately will you have a single TIPS ladder to 2047 or 2048? Will your ladder have some TIPS in your IRA and the rest in taxable?
Will you have more than one TIPS ladder (if that makes any sense)?
2. Why will your RMDs increase in the out years (little more detail please)?
User avatar
Kevin M
Posts: 15630
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by Kevin M »

Prudence wrote: Tue Feb 20, 2024 4:54 pm Kevin, I have a dozen questions, but I will just go with two:
1. Ultimately will you have a single TIPS ladder to 2047 or 2048? Will your ladder have some TIPS in your IRA and the rest in taxable?
Will you have more than one TIPS ladder (if that makes any sense)?
2. Why will your RMDs increase in the out years (little more detail please)?
Hi Prudence, feel free to ask as many questions as you like, as long as we don't derail the thread too much. If it does, we can find another thread in which to discuss it, or start a new thread, like "Designing a TIPS ladder to fund RMDs."

1. All my TIPS are in my IRA. I have way more in TIPS than I need to cover my residual living expenses--probably twice as much. Once I'm done with the first pass of building the ladder, I'll have a boatload of TIPS maturing in 2025-2027. Since these aren't matching liabilities, they are essentially part of my risk portfolio. They are risky because of the reinvestment risk.

I'm thinking I'll do a second pass with the ladder, assuming yields still entice me, and beef it up to cover the expected RMDs. Since the RMDs will be more than my necessary, residual living expenses, I'll either need to spend more (my wife likes this option!), give more away, or do something else with the RMDs. One option is to reinvest them in TIPS in taxable, but again, that will depend on real yields at the time, and all the other factors that go into my investment decisions.

2. It's a combination of the RMD % of portfolio value and the assumed nominal return. Perhaps it's easier to understand with an example.

I'll start RMDs in 2025 at age 73. The IRS Table III expected lifetime for age 73 is 26.5, which translates to a 3.77% withdrawal (= 1/26.5). With a real return of 2% and inflation of 2.5%, the nominal return is 4.55% ( = (1+2%)*(1+2.5%)-1 ). Since the expected return is more than the withdrawal rate, the portfolio will increase in value. I'll make up an IRA value to demonstrate.

If the 12/31/2024 value of the IRA is $1M, the 2025 withdrawal would be 37,735.85 (= 1,000,000 / 26.5). If I subtract that from $1M, then multiply the result by 1.0455, the result is 1,006,047.17. The expected lifetime for age 74 is 25.5, which is 3.92%, so that RMD would be 39,452.83.

Interestingly, the RMD withdrawal rate in 2030, for age 78, is 4.55%, the same as my assumed nominal return, and since it increases each year as the expected lifetime decreases, the portfolio starts to decrease in value after that. But the withdrawal rate increases at such a rate that the RMDs continue to increase until 2046, when I would be 94 if I live that long, and the RMD would be 71,543.25.

Of course all of this is in nominal terms, and I'd need to design the ladder in real terms to match the RMDs in real terms, so regardless of inflation, there will be enough in maturing TIPS proceeds and TIPS coupons to meet the RMDs in nominal terms. I started working on that as I was writing this.
If I make a calculation error, #Cruncher probably will let me know.
Prudence
Posts: 907
Joined: Fri Mar 09, 2012 3:55 pm

Re: Now that long TIPS yields are 60 bp off their highs I will…

Post by Prudence »

Ahh, makes sense. Thank you again Kevin.
Post Reply