New tool for building a TIPS ladder

[kaesler]

2) If I upload an existing ladder than modify it, it takes longer than I expected to enter new values.
…
Not a major issue. One solution is to have a re-calculate button. Another is to ignore the issue.

I hope to make this better.

[kaesler]

2) If I upload an existing ladder than modify it, it takes longer than I expected to enter new values.
…
Not a major issue. One solution is to have a re-calculate button. Another is to ignore the issue.

I hope to make this better.

This is fixed in the version I just deployed.

(I debounced the input of bond count. Similar in several other integer inputs in the app.)

[MtnBiker]

I hope to make this better.

This is fixed in the version I just deployed.

(I debounced the input of bond count. Similar in several other integer inputs in the app.)

Very nice! Thanks.

[exodusing]

I hope to make this better.

This is fixed in the version I just deployed.

(I debounced the input of bond count. Similar in several other integer inputs in the app.)

It's not working for me yet. I can now more easily enter a new value. However, I went to a TIPS I owned, entered a new value, then clicked down arrow for another year and it erased some or all of the digits I input.

I refreshed before doing this, to make sure I wasn't using an older version of the page.

[kaesler]

It's not working for me yet. I can now more easily enter a new value. However, I went to a TIPS I owned, entered a new value, then clicked down arrow for another year and it erased some or all of the digits I input.

I refreshed before doing this, to make sure I wasn't using an older version of the page.

I’m guessing you may have tried to increase the size of a pre-owned holding?

At the moment, pre-owned holdings can only be reduced in size, down as far as zero. If you want to buy more of that bond, use the other entry for that bond in that same rung.

Did I guess right? If not send me the result of clicking “Save”, along with a description of what your input was.

[kaesler]

It's not working for me yet. I can now more easily enter a new value. However, I went to a TIPS I owned, entered a new value, then clicked down arrow for another year and it erased some or all of the digits I input.

I refreshed before doing this, to make sure I wasn't using an older version of the page.

I’m guessing you may have tried to increase the size of a pre-owned holding?

At the moment, pre-owned holdings can only be reduced in size, down as far as zero. If you want to buy more of that bond, use the other entry for that bond in that same rung.

Did I guess right? If not send me the result of clicking “Save”, along with a description of what your input was.

Of course this distinction between pre-owned holdings and newly purchased ones, while necessary for the internal workings, I suppose could be hidden in a slicker user interface.

[exodusing]

It's not working for me yet. I can now more easily enter a new value. However, I went to a TIPS I owned, entered a new value, then clicked down arrow for another year and it erased some or all of the digits I input.

I refreshed before doing this, to make sure I wasn't using an older version of the page.

I’m guessing you may have tried to increase the size of a pre-owned holding?

At the moment, pre-owned holdings can only be reduced in size, down as far as zero. If you want to buy more of that bond, use the other entry for that bond in that same rung.

Did I guess right? If not send me the result of clicking “Save”, along with a description of what your input was.

Aha. I didn't realize that. Yes - I tried to increase a pre-owned holding. I added to the other box and it worked for increasing that TIPS. Thank you!

Alas, another issue: I increased 2050 by 100 bonds and the cash flow for 2025 went negative. The change to every other year looked sensible.

Of course this distinction between pre-owned holdings and newly purchased ones, while necessary for the internal workings, I suppose could be hidden in a slicker user interface.

Now that I understand, it's fine for me. Probably worthwhile if it's an easy change, otherwise not, IMO.

[kaesler]

...
Alas, another issue: I increased 2050 by 100 bonds and the cash flow for 2025 went negative. The change to every other year looked sensible.
...

In which column did you see the negative number? Did you mean 2040 rather than 2050?

[kaesler]

...
Alas, another issue: I increased 2050 by 100 bonds and the cash flow for 2025 went negative. The change to every other year looked sensible.
...

In which column did you see the negative number? Did you mean 2040 rather than 2050?

Oh I think I know what you're looking at: the Cash Flow Calendar? It probably is displaying the effect of your proposed purchase tomorrow of 100 2050 bonds? Expanding the entry for 2025 will reveal a Purchase.

[kaesler]

In which column did you see the negative number? Did you mean 2040 rather than 2050?

Oh I think I know what you're looking at: the Cash Flow Calendar? It probably is displaying the effect of your proposed purchase tomorrow of 100 2050 bonds? Expanding the entry for 2025 will reveal a Purchase.

I spot a bug: while the the Cash Flow Calendar under the manual ladder editor correctly shows the effect of proposed new bond purchases, it fails to display the result of proposed sales of existing holdings.

I'll fix it.

[kaesler]

[duplicate]

[kaesler]

Actually maybe it is more helpful to just ignore both the sales and purchases indicated in a manual edit session, and just show future incomes from the proposed ladder being built. Especially since the details of sales-of-old, and purchases-of-new are already visible in the "Properties" table below the editor.

Happily that also corresponds to a simpler change. Will think about it.

[exodusing]

Actually maybe it is more helpful to just ignore both the sales and purchases indicated in a manual edit session, and just show future incomes from the proposed ladder being built.

I'd vote for showing future incomes from the proposed ladder being built, ignoring both sales and purchases. My main concern with sales and purchases are to make sure I have enough money for the purchases.

[kaesler]

Actually maybe it is more helpful to just ignore both the sales and purchases indicated in a manual edit session, and just show future incomes from the proposed ladder being built.

I'd vote for showing future incomes from the proposed ladder being built, ignoring both sales and purchases. My main concern with sales and purchases are to make sure I have enough money for the purchases.

Yep. And your "Net Cost Today" is constantly updated in "Properties" as you experiment with ladder changes.

[exodusing]

I'd vote for showing future incomes from the proposed ladder being built, ignoring both sales and purchases. My main concern with sales and purchases are to make sure I have enough money for the purchases.

Yep. And your "Net Cost Today" is constantly updated in "Properties" as you experiment with ladder changes.

[kaesler]

Actually maybe it is more helpful to just ignore both the sales and purchases indicated in a manual edit session, and just show future incomes from the proposed ladder being built.

I'd vote for showing future incomes from the proposed ladder being built, ignoring both sales and purchases. My main concern with sales and purchases are to make sure I have enough money for the purchases.

Done.

[dcabler]

A new request to accommodate how I plan to use a ladder.

Using an example
- Suppose I want to build a ladder where a bond matures every January
- The way I plan on using this ladder is to take all coupons from the previous year, along with the bond maturing in January (and associated final coupon) for spending in the same year that the January bond matures.

Of course the actual ladder will produce coupons when it produces them and I'm free to spend, store it for later spending, or whatever. But this request is about an option for the tool itself to target annual cash flow based on the prior year's coupons + current year's maturing bond instead of on the current year's maturing bond and the current year's coupons (in my example case).

With some experiments I ran and some manual calculations, at least for a longer ladder, I get close to what I want anyway without the specific targeting. But there can be some distortions at either end of the ladder. Simple example is the last rung. Because the tool is only looking at current year cash flow from the ladder, the final rung only gets a maturing bond and associated final coupon vs. the maturing bond and associated final coupon and the previous year's 2 coupons.

Yes, there's interest rate risk for the coupons from the previous year. That's going to also be the case with the maturing bond as well, unless it's spent immediately as well as the coupons for the current year are spent immediately.

Thanks & Cheers.

[kaesler]

A new request to accommodate how I plan to use a ladder.

Using an example
- Suppose I want to build a ladder where a bond matures every January
- The way I plan on using this ladder is to take all coupons from the previous year, along with the bond maturing in January (and associated final coupon) for spending in the same year that the January bond matures.

Of course the actual ladder will produce coupons when it produces them and I'm free to spend, store it for later spending, or whatever. But this request is about an option for the tool itself to target annual cash flow based on the prior year's coupons + current year's maturing bond instead of on the current year's maturing bond and the current year's coupons (in my example case).

With some experiments I ran and some manual calculations, at least for a longer ladder, I get close to what I want anyway without the specific targeting. But there can be some distortions at either end of the ladder. Simple example is the last rung. Because the tool is only looking at current year cash flow from the ladder, the final rung only gets a maturing bond and associated final coupon vs. the maturing bond and associated final coupon and the previous year's 2 coupons.

Yes, there's interest rate risk for the coupons from the previous year. That's going to also be the case with the maturing bond as well, unless it's spent immediately as well as the coupons for the current year are spent immediately.

Thanks & Cheers.

For the record, this is how you’d achieve the desired result using the existing options:

• Set “Exclude pre-ladder interest”

• Income requirement kind = Minumum

• Which TIPS to choose = Earliest to mature

• Peruse the cash flow calendar for any years not meeting the requirement

• If there are any, “Refine ladder by hand”

• Add an extra bond to mature in each of the problem years.

I tried a few sample cases and the first 4 steps were sufficient.

[dcabler]

A new request to accommodate how I plan to use a ladder.

Using an example
- Suppose I want to build a ladder where a bond matures every January
- The way I plan on using this ladder is to take all coupons from the previous year, along with the bond maturing in January (and associated final coupon) for spending in the same year that the January bond matures.

Of course the actual ladder will produce coupons when it produces them and I'm free to spend, store it for later spending, or whatever. But this request is about an option for the tool itself to target annual cash flow based on the prior year's coupons + current year's maturing bond instead of on the current year's maturing bond and the current year's coupons (in my example case).

With some experiments I ran and some manual calculations, at least for a longer ladder, I get close to what I want anyway without the specific targeting. But there can be some distortions at either end of the ladder. Simple example is the last rung. Because the tool is only looking at current year cash flow from the ladder, the final rung only gets a maturing bond and associated final coupon vs. the maturing bond and associated final coupon and the previous year's 2 coupons.

Yes, there's interest rate risk for the coupons from the previous year. That's going to also be the case with the maturing bond as well, unless it's spent immediately as well as the coupons for the current year are spent immediately.

Thanks & Cheers.

For the record, this is how you’d achieve the desired result using the existing options:

• Set “Exclude pre-ladder interest”

• Income requirement kind = Minumum

• Which TIPS to choose = Earliest to mature

• Peruse the cash flow calendar for any years not meeting the requirement

• If there are any, “Refine ladder by hand”

• Add an extra bond to mature in each of the problem years.

I tried a few sample cases and the first 4 steps were sufficient.

Thanks. Other than choosing "minimum" (I still chose average) that's exactly what I did today when I created and purchased my 30 year ladder. As I noted above, it turns out that it's pretty close. But I still had to convince myself by downloading the cash flow calendar and manually summing up the prior year's coupons + current year's maturing bond to be absolutely certain for my usage of the cash flow. Fortunately, when I got to the end, it only required one minor adjustment.

I don't think there really is a way to easily peruse the cash flow calendar when you define cash flow as I have - current year's maturing bond (and final coupon) plus all of the prior year's interest. Adding a button to define it that way would have made things easier for me. But if nobody else is interested in this, then it probably doesn't matter, especially since I already created my ladder now.

Cheers.

[kaesler]

A new version of the app just deployed. Changes were made to improve responsiveness and usability with respect to keyboard focus in the Analyse, Build and Generate pages.

[rockstar]

Good tool. I played around with it last night.

The only bit for me that wasn’t super clear was how you’re handling the gap years that are missing. It looks like you’re loading up on an earlier maturity date to cover the missing years. But I wasn’t sure how you handle the inflation in those missing years as the earlier bond would have matured. Maybe I’m missing something.

[MtnBiker]

The only bit for me that wasn’t super clear was how you’re handling the gap years that are missing. It looks like you’re loading up on an earlier maturity date to cover the missing years. But I wasn’t sure how you handle the inflation in those missing years as the earlier bond would have matured. Maybe I’m missing something.

A suggestion for how the gap years could be covered using a duration-matched mixture of earlier and later maturities is given in this post. The idea would be to hold the bracket year maturities until the actual gap-year bond becomes available. Then sell the temporary bracket year holdings and use the proceeds to buy the actual gap year. Annually repeat until all gap years are filled. This effectively locks in today's real yield for each of the gap years.

In the interest of full disclosure, please note that in the event of a substantial change in yields between now and the time of a swap, rebalancing of the bracket year holdings to maintain duration matching or other adjustments (such as described here) could be recommended.

[kaesler]

The only bit for me that wasn’t super clear was how you’re handling the gap years that are missing. It looks like you’re loading up on an earlier maturity date to cover the missing years.

You control this using the option labelled "Which TIPS to use to fund a year without a maturing TIPS"

But I wasn’t sure how you handle the inflation in those missing years as the earlier bond would have matured. Maybe I’m missing something.

This is something you as the ladder owner handle when the time comes. There has been lots of discussion on this, which you will find if you search for "gap years". The rough consensus seems to be to buy approximately equal amounts of bonds maturing in 2 years straddling the gap year. Then when the gap year bond is eventually issued you sell the straddlers and buy the new issue.

The tool can help you in that latter process. You

• Load your portfolio into the "Build" page

• In the rung for the formerly-gap year, reduce the counts on the straddlers to zero. The tool will display an estimate of the sales proceeds.

• Increase the count (from zero) of the newly-issued bond until you've "spent" the sales proceeds.

• Download the "Bonds to sell" and "Bonds to buy" lists, and make the trades.