Trading Treasuries (nominal and TIPS)

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Kevin M
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

Prudence wrote: Thu Oct 06, 2022 7:54 am
Kevin M wrote: Wed Oct 05, 2022 3:08 pm
Prudence wrote: Wed Oct 05, 2022 2:32 pm I want the certain purchasing power and will hold this in my IRA. If actual inflation averages more than 2.3% between now and July, which seems certain (not expected), then the TIPS will give me a better real return, or what am I misunderstanding?
Then go with TIPS for the reason in your first sentence. As others have said, there is no certainty in future inflation. If your view is that the market is underestimating expected inflation, or that the liquidity and unexpected inflation premiums are pushing BEI below actual inflation expectations, then that's even more reason to go with TIPS.

Based on quotes I pulled earlier today from Fidelity, standard BEI for the 7/15/23 TIPS = 2.37%, and seasonally adjusted it's 2.50%. We already know the inflation adjustments through Nov 1, and from Nov 1 to maturity the seasonally-adjusted BEI is 2.73%.

Kevin
How is that calculated?
It's a bit complicated. I got the formulas from a #Cruncher post to start, created my own implementation in Google Sheets, and then tweaked it to use the forward rate for the nominal yield as of the last known reference date. I can try to explain it in words if you want, but unless you want to replicate it in your own spreadsheet, I don't think it will do much good.
If I make a calculation error, #Cruncher probably will let me know.
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Re: Trading Treasuries (nominal and TIPS)

Post by jeffyscott »

^ I don't know if the question was more about how to calculate seasonally adjusted yield or merely how to go from that to a seasonally adjusted BEI. If it's the latter, then it's just a matter of subtracting the seasonally adjusted yield of the TIPS from the nominal Treasury yield for the same maturity.

If it's about the seasonally adjusted yield calculation, then I've got nothing. But, conceptually, I've come to think that as an estimate of the yield that a TIPS would be trading at, if they were indexed to seasonally adjusted inflation.
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

jeffyscott wrote: Thu Oct 06, 2022 12:21 pm ^ I don't know if the question was more about how to calculate seasonally adjusted yield or merely how to go from that to a seasonally adjusted BEI. If it's the latter, then it's just a matter of subtracting the seasonally adjusted yield of the TIPS from the nominal Treasury yield for the same maturity.

If it's about the seasonally adjusted yield calculation, then I've got nothing. But, conceptually, I've come to think that as an estimate of the yield that a TIPS would be trading at, if they were indexed to seasonally adjusted inflation.
The part that was highlighted in red was about the BEI (seasonally adjusted) from the last known reference CPI date to maturity. For that it's more complicated, since you need to project the CPI to the last known reference date (LKR) with a calculation involving ref CPI, nominal yield, TIPS yield, and the term to maturity.

I use the forward nominal yield as of LKR. For the seasonally adjusted (SA) version, I use the SA TIPS yield and the SA ref CPI.

Then the BEI is calculated with another formula involving ref CPI, LKR projected CPI, and the number of years between LKR and maturity. Again, the SA version uses the SA LKR projected CPI and the SA ref CPI.

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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

Yield for the nominal Treasury bill maturing 4/6/2023 (6 months) now is a tad over 4%, and the large/small-qty spread is tiny. Currently 4.017 for min qty 1,000, and 4.015 for min qty 10. I bought some of this at Vanguard for a couple of family members just now.

By comparison, 7-day yield on VUSXX (Vanguard Treasury MM) is 2.60%, and the 4/15/2023 TIPS yield was seasonally-adjusted 1.41% (ask yield 2.44%) when I pulled the quotes earlier today. Currently the 4/15/2023 TIPS yield for min qty 1 is 2.400% and for min qty 100 it's 2.445%.

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Re: Trading Treasuries (nominal and TIPS)

Post by #Cruncher »

vineviz wrote: Thu Oct 06, 2022 8:33 am
Kevin M wrote: Wed Oct 05, 2022 5:21 pmI was able to find TIPS at FRED for all my maturities except 4/15/2026 and 4/15/2027 (I could find 1/15 and 7/15 issues for both years). Here are the FRED series IDs:
Here is what I believe to be a complete list of outstanding individual TIPS that have data on FRED.

Code: Select all

FRED series		URL	Length	Instrument	Maturity
DTP10J23		https://fred.stlouisfed.org/series/DTP10J23	10-Year	  0-1/8% Treasury Inflation-Indexed Note	15-Jan-2023
DTP5A23		https://fred.stlouisfed.org/series/DTP5A23	5-Year	  0.625% Treasury Inflation-Indexed Note	15-Apr-2023
DTP10L23		https://fred.stlouisfed.org/series/DTP10L23	10-Year	  0-3/8% Treasury Inflation-Indexed Note	15-Jul-2023
...
DTP30F48		https://fred.stlouisfed.org/series/DTP30F48	30-Year	  1.0% Treasury Inflation-Indexed Bond	15-Feb-2048
DTP30F49		https://fred.stlouisfed.org/series/DTP30F49	30-Year	  1.0% Treasury Inflation-Indexed Bond	15-Feb-2049
DTP30F50		https://fred.stlouisfed.org/series/DTP30F50	30-Year	  0.250% Treasury Inflation-Indexed Bond	15-Feb-2050
Here are the URL's constructed for all 89 TIPS issued so far using vineviz's FRED series codes. Some of these links are not yet active. I believe FRED only shows a graph after the TIPS has been outstanding for about two years. I've included these, but have indicated them by showing the maturity date as YYYY/MM/DD instead of MM/DD/YYYY the links in red.

2002: 07/15/2002 3.625% 05yr
2007: 01/15/2007 3.375% 10yr
2008: 01/15/2008 3.625% 10yr
2009: 01/15/2009 3.875% 10yr
2010: 01/15/2010 4.250% 10yr : 04/15/2010 0.875% 05yr
2011: 01/15/2011 3.500% 10yr : 04/15/2011 2.375% 05yr
2012: 01/15/2012 3.375% 10yr : 07/15/2012 3.000% 10yr : 04/15/2012 2.000% 05yr
2013: 07/15/2013 1.875% 10yr : 04/15/2013 0.625% 05yr
2014: 01/15/2014 2.000% 10yr : 07/15/2014 2.000% 10yr : 04/15/2014 1.250% 05yr
2015: 01/15/2015 1.625% 10yr : 07/15/2015 1.875% 10yr : 04/15/2015 0.500% 05yr
2016: 01/15/2016 2.000% 10yr : 07/15/2016 2.500% 10yr : 04/15/2016 0.125% 05yr
2017: 01/15/2017 2.375% 10yr : 07/15/2017 2.625% 10yr : 04/15/2017 0.125% 05yr
2018: 01/15/2018 1.625% 10yr : 07/15/2018 1.375% 10yr : 04/15/2018 0.125% 05yr
2019: 01/15/2019 2.125% 10yr : 07/15/2019 1.875% 10yr : 04/15/2019 0.125% 05yr
2020: 01/15/2020 1.375% 10yr : 07/15/2020 1.250% 10yr : 04/15/2020 0.125% 05yr
2021: 01/15/2021 1.125% 10yr : 07/15/2021 0.625% 10yr : 04/15/2021 0.125% 05yr
2022: 01/15/2022 0.125% 10yr : 07/15/2022 0.125% 10yr : 04/15/2022 0.125% 05yr
2023: 01/15/2023 0.125% 10yr : 07/15/2023 0.375% 10yr : 04/15/2023 0.625% 05yr
2024: 01/15/2024 0.625% 10yr : 07/15/2024 0.125% 10yr : 04/15/2024 0.500% 05yr : 10/15/2024 0.125% 05yr
2025: 01/15/2025 0.250% 10yr : 07/15/2025 0.375% 10yr : 01/15/2025 2.375% 20yr : 04/15/2025 0.125% 05yr : 10/15/2025 0.125% 05yr
2026: 01/15/2026 0.625% 10yr : 07/15/2026 0.125% 10yr : 01/15/2026 2.000% 20yr : 04/15/2026 0.125% 05yr : 10/15/2026 0.125% 05yr
2027: 01/15/2027 0.375% 10yr : 07/15/2027 0.375% 10yr : 01/15/2027 2.375% 20yr : 04/15/2027 0.125% 05yr
2028: 01/15/2028 0.500% 10yr : 07/15/2028 0.750% 10yr : 01/15/2028 1.750% 20yr : 04/15/2028 3.625% 30yr
2029: 01/15/2029 0.875% 10yr : 07/15/2029 0.250% 10yr : 01/15/2029 2.500% 20yr : 04/15/2029 3.875% 30yr
2030: 01/15/2030 0.125% 10yr : 07/15/2030 0.125% 10yr
2031: 01/15/2031 0.125% 10yr : 07/15/2031 0.125% 10yr
2032: 01/15/2032 0.125% 10yr : 07/15/2032 0.625% 10yr : 04/15/2032 3.375% 30yr
2040: 02/15/2040 2.125% 30yr
2041: 02/15/2041 2.125% 30yr
2042: 02/15/2042 0.750% 30yr
2043: 02/15/2043 0.625% 30yr
2044: 02/15/2044 1.375% 30yr
2045: 02/15/2045 0.750% 30yr
2046: 02/15/2046 1.000% 30yr
2047: 02/15/2047 0.875% 30yr
2048: 02/15/2048 1.000% 30yr
2049: 02/15/2049 1.000% 30yr
2050: 02/15/2050 0.250% 30yr
2051: 02/15/2051 0.125% 30yr
2052: 02/15/2052 0.125% 30yr

Edited 7:50 AM 10/7/2022 to show inactive links in red and add the following related to Kevin M response below.
Kevin M wrote: Thu Oct 06, 2022 3:28 pmI find these by searching on "treasury inflation-indexed due", and then filter for daily frequency. This returns 78 series.
Kevin is using the blue "Search Fred" box at the top of the Categories page. He then chooses the "Daily" filter on the left side under "Frequencies". His result of "78 series" agrees with my listing above: 89 TIPS issued less 11 inactive links (in red) = 78.
Last edited by #Cruncher on Fri Oct 07, 2022 6:49 am, edited 2 times in total.
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Re: Trading Treasuries (nominal and TIPS)

Post by acegolfer »

Dumb Q. Suppose I buy a 10-yr 4% T-note with $1k par from TD.gov. Where will the $20 coupon every 6 months go? Will it be in interest bearing account?
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

#Cruncher wrote: Thu Oct 06, 2022 3:04 pm
vineviz wrote: Thu Oct 06, 2022 8:33 am
Kevin M wrote: Wed Oct 05, 2022 5:21 pmI was able to find TIPS at FRED for all my maturities except 4/15/2026 and 4/15/2027 (I could find 1/15 and 7/15 issues for both years). Here are the FRED series IDs:
Here is what I believe to be a complete list of outstanding individual TIPS that have data on FRED.
<snip>
Here are the URL's constructed for all 89 TIPS issued so far using vineviz's FRED series codes. Some of these links are not yet active. I believe FRED only shows a graph after the TIPS has been outstanding for about two years. I've included these, but have indicated them by showing the maturity date as YYYY/MM/DD instead of MM/DD/YYYY.
Thanks to both of you for sharing this.

I find these by searching on "treasury inflation-indexed due", and then filter for daily frequency. This returns 78 series. Most if not all of the ones with weekly or monthly frequency have been discontinued. There are 149 series if you don't apply the daily filter.

Once you have the search results, you can just do a web page search for the year of interest. For example, searching for 2027 you'll find the 7/15/2027 and two maturing on 1/15/2027 (no 4/15/2027).

Kevin
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Re: Trading Treasuries (nominal and TIPS)

Post by TheTimeLord »

Anyone else eyeing the 10 year?
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

TheTimeLord wrote: Thu Oct 06, 2022 10:39 pm Anyone else eyeing the 10 year?
I am not (I think you are referring to the upcoming 10-year nominal Treasury auction). The 10-year yield is near the bottom of an inverted yield curve segment, and if I wanted to go out 10 years I'd probably buy TIPS instead.

Image

I think a real yield of about 1.6% would be more appealing to me than a nominal yield of about 3.8%, which is what 2032 yields were today. But that real yield also is near the bottom of an inverted yield curve segment. I am generally averse to this--call it a personal taste, and I also understand the arguments about price risk vs. reinvestment risk. I have been buying some shorter-term TIPS at lower yields on an inverted yield curve segment, so making my modest accommodation to reinvestment risk.

Image

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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

#Cruncher wrote: Thu Oct 06, 2022 3:04 pm
vineviz wrote: Thu Oct 06, 2022 8:33 am
Kevin M wrote: Wed Oct 05, 2022 5:21 pm
Here is what I believe to be a complete list of outstanding individual TIPS that have data on FRED.
Edited 7:50 AM 10/7/2022 to show inactive links in red and add the following related to Kevin M response below.
Kevin M wrote: Thu Oct 06, 2022 3:28 pmI find these by searching on "treasury inflation-indexed due", and then filter for daily frequency. This returns 78 series.
Kevin is using the blue "Search Fred" box at the top of the Categories page. He then chooses the "Daily" filter on the left side under "Frequencies". His result of "78 series" agrees with my listing above: 89 TIPS issued less 11 inactive links (in red) = 78.
Thanks for the update. There are several places you can do a search on FRED. I usually just search from the home screen:

Image

Kevin
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Re: Trading Treasuries (nominal and TIPS)

Post by Joe Public »

acegolfer wrote: Thu Oct 06, 2022 3:15 pm Dumb Q. Suppose I buy a 10-yr 4% T-note with $1k par from TD.gov. Where will the $20 coupon every 6 months go? Will it be in interest bearing account?
I don’t hold any notes at Treasury Direct right now, but, with my maturing bills, TD allows me to choose between my linked bank account or the Treasury Direct 0% certificate of indebtedness.
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Re: Trading Treasuries (nominal and TIPS)

Post by midnightrun »

2 questions for the forum:

1. Does anyone know if it's possible to buy TIPS on the secondary market through a TD Ameritrade account? It looks like nominal treasuries and STRIPS are easily searchable, but TIPS are nowhere to be found on the web interface. There is a bond trading number to call, but the hold time was an hour when I tried today ... gave up on that.

2. If one has the choice of using vanguard, fidelity, schwab or TD ameritrade tax deferred accounts to buy TIPS and STRIPS, is there typically a substantial enough price difference to make it worth comparison shopping for lower purchase volumes (<50)? I'm assuming the market is efficient for nominal treasuries so choice of brokerage is unlikely to matter but wasn't sure if it differed for more thinly traded issues.
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

midnightrun wrote: Fri Oct 07, 2022 6:30 pm 2 questions for the forum:

1. Does anyone know if it's possible to buy TIPS on the secondary market through a TD Ameritrade account? It looks like nominal treasuries and STRIPS are easily searchable, but TIPS are nowhere to be found on the web interface. There is a bond trading number to call, but the hold time was an hour when I tried today ... gave up on that.

2. If one has the choice of using vanguard, fidelity, schwab or TD ameritrade tax deferred accounts to buy TIPS and STRIPS, is there typically a substantial enough price difference to make it worth comparison shopping for lower purchase volumes (<50)? I'm assuming the market is efficient for nominal treasuries so choice of brokerage is unlikely to matter but wasn't sure if it differed for more thinly traded issues.
1. I know nothing about TD Ameritrade.

2. Lately I have been finding pretty much identical offerings at Vanguard and Fidelity, although Fidelity often has a deeper book (more offers for smaller quantities).

A few years ago Schwab generally had the best pricing for minimum quantity 1--meaning their price for min quantity 1 was as good or better than larger minimum quantities, so typically better than Fidelity or Vanguard for small quantities. So back then, I did most of my taxable Treasury trading at Schwab.

My current preference is Fidelity, but I also buy at Vanguard. Schwab was not selling TIPS online when yields were negative earlier this year. I was buying these TIPS online at Fidelity and Schwab.

Kevin
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Re: Trading Treasuries (nominal and TIPS)

Post by TheTimeLord »

Anyone else participating in today's 3 year auction?
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Re: Trading Treasuries (nominal and TIPS)

Post by Prudence »

Kevin: As an experiment, today I bought 34 TIPS due 4/15/2026 at a price of 94.07, CUSIP of 91282CCA7, YTM 1.899. The principal is $36,129.02, with accrued interest $23.61, for a net of $36,152.63. My objective was to ensure that approximately $36,000 in my tIRA will not lose purchasing value between now and 4/15/2026. Did I achieve my objective? (I may have bought too many, but don't know).
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

Prudence wrote: Tue Oct 11, 2022 8:55 am Kevin: As an experiment, today I bought 34 TIPS due 4/15/2026 at a price of 94.07, CUSIP of 91282CCA7, YTM 1.899. The principal is $36,129.02, with accrued interest $23.61, for a net of $36,152.63. My objective was to ensure that approximately $36,000 in my tIRA will not lose purchasing value between now and 4/15/2026. Did I achieve my objective? (I may have bought too many, but don't know).
Looks like you did what you wanted to do.

Best price I see now is 94.110 for min qty 100, and 94.118 for min qty 25 for a yield of 1.865%. The inflation factor for purchase today is 1.12960, so adjusted price is 106.306656.

You will receive 100 (unadjusted) at maturity. The adjusted price you receive at maturity depends on inflation. If net inflation is positive from settlement to maturity, you will receive more than the adjusted price at settlement. If there were net deflation, you would receive less. You will also receive your small inflation adjusted coupon payments.

If you hold to maturity, your real internal rate of return will equal your initial yield (or be very close). So not only will you not lose purchasing power, your purchasing power will increase. This is true even if there were net deflation, since the price of stuff you buy goes down along with deflation.

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Re: Trading Treasuries (nominal and TIPS)

Post by drzzzzz »

TheTimeLord wrote: Tue Oct 11, 2022 8:26 am Anyone else participating in today's 3 year auction?
We did
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Re: Trading Treasuries (nominal and TIPS)

Post by #Cruncher »

Prudence wrote: Tue Oct 11, 2022 8:55 am... As an experiment, today I bought 34 TIPS due 4/15/2026 ... My objective was to ensure that approximately $36,000 in my tIRA will not lose purchasing value between now and 4/15/2026. Did I achieve my objective? (I may have bought too many, but don't know).
You may have bought too many. At maturity you'll receive $34,000 of the purchasing power of April 2021 dollars when the TIPS was issued. But as of 10/12/2022, the settlement date of your purchase, one of these April 2021 dollars is now worth $1.12960. So to guarantee getting $36,000 of today's purchasing power, you only needed to buy about $32,000 of face value.
$31,870 = 36000 / 1.12960

Code: Select all

                         Col A        Col B   Formula
  2                     Coupon       0.125%
  3              Maturity date   04/15/2026
  4            Settlement date   10/12/2022
  5  Index ratio on settlement      1.12960
  6                      Price       94.07%
  7       Face value purchased       31,870
  8        Principal purchased    36,000.35  =B7*B5
  9          Cost of principal    33,865.53  =B8*B6
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Re: Trading Treasuries (nominal and TIPS)

Post by midnightrun »

Kevin M wrote: Fri Oct 07, 2022 6:49 pm
midnightrun wrote: Fri Oct 07, 2022 6:30 pm 2 questions for the forum:

1. Does anyone know if it's possible to buy TIPS on the secondary market through a TD Ameritrade account? It looks like nominal treasuries and STRIPS are easily searchable, but TIPS are nowhere to be found on the web interface. There is a bond trading number to call, but the hold time was an hour when I tried today ... gave up on that.
1. I know nothing about TD Ameritrade.

Kevin
Just to follow up for the community ... I called TD Ameritrade's bond desk today. Initially the agent said that they do not transact TIPS via the brokerage window and require a phone order with a bond specialist. Per the agent I spoke with, cost is $1/transaction for TIPS maturities at least 1 year out.

However, I just received a call back and was informed that there is a way to find them on the brokerage window:
Go to bond research page
click "advanced search"
Choose "treasuries" tab and hit the green "search" button. All treasuries will pop up
Click the green "refine search" button. A pop up window will appear and allow you to filter only TIPS.

Looks like online purchase is available on that window. The smallest quantity I've seen for TIPS or STRIPS on TD Ameritrade is 5.
Last edited by midnightrun on Tue Oct 11, 2022 1:50 pm, edited 1 time in total.
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

My last TIPS purchase was the 7/15/2024 on 10/3/2022 at 1.93% (1.87% seasonally-adjusted). When I pulled quotes today from Fidelity, the high yield was 1.58% (1.54% SA), so 35 basis points lower (33 bps SA). It's now down to 1.542 for min qty 100, and 1.526 for min qty 1. So now closer to 40 bps lower.

Image

1. The series has not been updated at FRED since 10/5.
2. The most recent red dot is for a hypothetical purchase today.

DW received her IRA transfer at Fidelity, but I'm putting it in FZDXX today (2.99%), and seeing what tomorrow brings. I would like to add the 7/15/2024 to her holdings next.

At the longer end, yields are all below 2% now.

Kevin
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Re: Trading Treasuries (nominal and TIPS)

Post by jeffyscott »

#Cruncher wrote: Tue Oct 11, 2022 1:18 pm
Prudence wrote: Tue Oct 11, 2022 8:55 am... As an experiment, today I bought 34 TIPS due 4/15/2026 ... My objective was to ensure that approximately $36,000 in my tIRA will not lose purchasing value between now and 4/15/2026. Did I achieve my objective? (I may have bought too many, but don't know).
You may have bought too many. At maturity you'll receive $34,000 of the purchasing power of April 2021 dollars when the TIPS was issued. But as of 10/12/2022, the settlement date of your purchase, one of these April 2021 dollars is now worth $1.12960. So to guarantee getting $36,000 of today's purchasing power, you only needed to buy about $32,000 of face value.
$31,870 = 36000 / 1.12960

Code: Select all

                         Col A        Col B   Formula
  2                     Coupon       0.125%
  3              Maturity date   04/15/2026
  4            Settlement date   10/12/2022
  5  Index ratio on settlement      1.12960
  6                      Price       94.07%
  7       Face value purchased       31,870
  8        Principal purchased    36,000.35  =B7*B5
  9          Cost of principal    33,865.53  =B8*B6
Also $32,000 compounded at 1.9% (the real yield) for about 3.5 years is about $36,000.
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Re: Trading Treasuries (nominal and TIPS)

Post by Prudence »

High five, thanks guys!
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Re: Trading Treasuries (nominal and TIPS)

Post by Prudence »

#Cruncher wrote: Tue Oct 11, 2022 1:18 pm
Prudence wrote: Tue Oct 11, 2022 8:55 am... As an experiment, today I bought 34 TIPS due 4/15/2026 ... My objective was to ensure that approximately $36,000 in my tIRA will not lose purchasing value between now and 4/15/2026. Did I achieve my objective? (I may have bought too many, but don't know).
You may have bought too many. At maturity you'll receive $34,000 of the purchasing power of April 2021 dollars when the TIPS was issued. But as of 10/12/2022, the settlement date of your purchase, one of these April 2021 dollars is now worth $1.12960. So to guarantee getting $36,000 of today's purchasing power, you only needed to buy about $32,000 of face value.
$31,870 = 36000 / 1.12960

Code: Select all

                         Col A        Col B   Formula
  2                     Coupon       0.125%
  3              Maturity date   04/15/2026
  4            Settlement date   10/12/2022
  5  Index ratio on settlement      1.12960
  6                      Price       94.07%
  7       Face value purchased       31,870
  8        Principal purchased    36,000.35  =B7*B5
  9          Cost of principal    33,865.53  =B8*B6
Ok, I think I got it now. Tomorrow, if I buy 33 of cusip 91282CEJ6, those dollars will be worth about $34,623 now, using the 10/13/2022 index value of 1.04919. Am I right?
kxl19
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Re: Trading Treasuries (nominal and TIPS)

Post by kxl19 »

When buying TIPs direct at Fidelity or Vanguard, does anyone know whether the interest payments can be auto-transferred out or re-invested?

Or is that feature only unique to mutual funds?
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Kevin M
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

kxl19 wrote: Wed Oct 12, 2022 10:46 am When buying TIPs direct at Fidelity or Vanguard, does anyone know whether the interest payments can be auto-transferred out or re-invested?

Or is that feature only unique to mutual funds?
Interest from individual bonds goes into your settlement fund. As far as I know, there is no choice about that. Of course you can then reinvest or transfer from your settlement fund to your bank.
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

Folks, this is not an I bonds vs. TIPS thread. I bonds cannot be traded; i.e., they cannot be bought and sold on an open market. Would appreciate it if we could stay on topic.

Thanks,

Kevin
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Re: Trading Treasuries (nominal and TIPS)

Post by Kendall »

Please stick to the topic at hand, which is making Treasury bond purchases. Several posts about I bonds vs. TIPS were moved to a new topic in Personal Investments. viewtopic.php?p=6912442#p6912442

- moderator Kendall
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Hector
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Re: Trading Treasuries (nominal and TIPS)

Post by Hector »

Kevin M wrote: Fri Sep 02, 2022 4:29 pm
VictoriaF wrote: Fri Sep 02, 2022 3:12 pm On Sep 1, 2022, I placed an order at Vanguard for 8-week T-bills, which have the settlement date of Sep 6 and mature on Nov 1.

Additionally, I had 13-week T-bills, that settled on June 2 and matured on Sep 1. I wanted to include the proceeds of these 13-week T-bills in the purchase of the new 8-week T-bills. But when I was using Vanguard's interface for buying Treasuries, it was not showing this money as available for trading.

I recall Kevin writing that Vanguard would accept a purchase request if the funds become available before the settlement date. But I decided not to risk having possible problems with the main purchase. I expect to add more money to this account, buy 4-week T-bills some time in October, and on November 1, to roll the total amount into new T-bills.

But in Oct, I will still have the same problem. I will want to buy T-Bills that settle on Tuesday, Nov 1. I will have to submit a trade request no later than Thursday, Oct 27, and on that date Vanguard will not be showing the funds as available.

I realize that Fidelity makes rolling old T-bills into new ones easier. But some of my money has been and will be sitting in a money market fund, and Vanguard's VMFXX has better rates than Fidelity's MM.

And so I have several questions:
1. What will happen if on Oct 27, I place in Vanguard an order for T-bills with the money that will become available only on Nov 1? [As a reminder, Nov 1 is the date of both: the maturity of the old T-bills and of the settlement of the new T-bills.]
2. If rolling T-bills into new ones immediately is difficult, should I just keep the money in VMFXX for a week?
3. Also, I will be getting some cash in my Fidelity account, which I will want to transfer to Vanguard to consolidate all my purchases. How long does it take to transfer money from Fidelity to Vanguard and have the money available for trading?
4. Finally, all these money are intended for buying an apartment. If I need the money urgently, will I be able to sell T-bills in Vanguard on the secondary market?

Note: All these money are in Roth IRA.

Thanks a lot,
Victoria
1. We had a member post in this thread that they did exactly this, and it worked fine; i.e., enough cash not in settlement fund, but matured bills cash available by settlement.

2. If you're worried about it for a large purchase, do a small purchase of 4-week bills and use the proceeds at maturity to buy more bills. For maturity of 1 month or less, I'd just leave it in a money market fund, since yield is about the same. For 2-month or more, why not buy on the secondary market as soon as the matured cash is available for purchase? That's what I would do.

3. For taxable accounts, you want to have Fidelity set up as a bank at Vanguard, which you can do. Initiate the sale at Vanguard with proceeds to Fidelity "checking", and it will be there 2 trading days after the sale.

For IRA (including Roth), you must do an IRA transfer using the Fidelity form, and it take 2-3 weeks for the transfer to complete--might be faster from broker to broker; I've done mostly broker to bank or vice versa.

4. Yes. You might lose a bit, or not earn the original yield, but Treasuries are very liquid, so easy to sell with small bid/ask spreads. Most of my Treasuries have negative returns at this point, or returns much lower than initial yield.

Also, note that Fidelity FZDXX has yield comparable to VMFXX. Minimum for IRA is $10K ($100K in taxable, but you don't need to maintain this minimum).

Kevin
Due to higher ER of FZDXX, when does it make sense to buy FZDXX compared to 4 or 8 week Treasury bills?
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

Hector wrote: Wed Oct 12, 2022 4:51 pm Due to higher ER of FZDXX, when does it make sense to buy FZDXX compared to 4 or 8 week Treasury bills?
The ER is accounted for in the SEC yield, so just look at the yield. In taxable, Treasury interest is not taxed at the state and local level, so also factor that in.

SEC 1-day and 7-day yields for FZDXX are both 3.00% as of 10/11/2022. The 1/12/2023 Treasury bill ask yield was 3.60% at Fidelity, and the 04/06/2023 bill ask yield was 4.08%. Factor in the state income tax, and compare those. FZDXX yield will continue to increase as long as the Fed continues increasing the federal funds rate (FFR), so we don't know which will do better.

Kevin
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Re: Trading Treasuries (nominal and TIPS)

Post by Tom_T »

Curious to see what is being offered today -- rates are way up after the CPI release.
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Re: Trading Treasuries (nominal and TIPS)

Post by TheTimeLord »

Tom_T wrote: Thu Oct 13, 2022 8:25 am Curious to see what is being offered today -- rates are way up after the CPI release.
https://home.treasury.gov/system/files/ ... Q32022.pdf

And of course there is a secondary market selling a wide array of offerings.
Last edited by TheTimeLord on Thu Oct 13, 2022 8:31 am, edited 1 time in total.
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Tom_T
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Re: Trading Treasuries (nominal and TIPS)

Post by Tom_T »

TheTimeLord wrote: Thu Oct 13, 2022 8:30 am
Tom_T wrote: Thu Oct 13, 2022 8:25 am Curious to see what is being offered today -- rates are way up after the CPI release.
https://home.treasury.gov/system/files/ ... Q32022.pdf
Sorry - I meant on the secondary market. I'll check my brokerage site for prices and yields.

Looks like we've broken the 2% level for TIPS. Looking at 2025, 2026. 27,28 are right about there. 2045 is there. Hmm...
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Poor pricing for treasury sale at Etrade

Post by indexfundfan »

I just had my first experience selling a treasury note on Etrade and I wanted to report a caution regarding selling treasuries at Etrade, and by extension holding treasuries at Etrade.

Like Fidelity, when selling a treasury at Etrade, you can view the “Book of Depth” if you enter in the CUSIP number of the bond. The “book” shows you the existing bid and ask pricing, together with the minimum number of bonds required for each price.

But this is where it ends. Even though Etrade shows you what the existing bids are (for a sale), you are not able to select to sell to that bidder. Instead, you are required to submit a bid request. This bid request takes a minute to complete and comes back with an unfavorable price compared to what is shown in the “book”. For my trade, this price is about 10 cents lower than the corresponding bid shown in the “Book” (e.g. if the book shows a bid price of $93.50, the bid request, for the same corresponding number of bonds for sale, would come back with a bid price of around $93.40).

This means that even though Etrade advertised no commissions for selling treasury bonds, I still paid approx 0.10/93.50 = 0.1% commission due to the embedded poorer price. My trade was around $20k, and the cost is about $20.

I have my IRA at Etrade and I had bought some treasury bonds through them previously. But I won’t be buying treasury bonds through them anymore. For buying or selling treasuries on the secondary market, I recommend using Fidelity or Schwab.

PS. Interestingly, for a purchase, you are allowed to select the corresponding "ask price". You do not need to solicit a request for a purchase.
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Tom_T
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Re: Trading Treasuries (nominal and TIPS)

Post by Tom_T »

Tom_T wrote: Thu Oct 13, 2022 8:31 am
TheTimeLord wrote: Thu Oct 13, 2022 8:30 am
Tom_T wrote: Thu Oct 13, 2022 8:25 am Curious to see what is being offered today -- rates are way up after the CPI release.
https://home.treasury.gov/system/files/ ... Q32022.pdf
Sorry - I meant on the secondary market. I'll check my brokerage site for prices and yields.

Looks like we've broken the 2% level for TIPS. Looking at 2025, 2026. 27,28 are right about there. 2045 is there. Hmm...
Well, that didn't last long. No longer showing 2%. Bond market came back a little bit after the open.
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Re: Trading Treasuries (nominal and TIPS)

Post by GetSmarter »

vineviz wrote: Tue Sep 27, 2022 5:57 am
nonnie wrote: Mon Sep 26, 2022 8:38 pm Thanks for your response but I'm not sure I understand--perhaps I was unclear? Yes, they have higher yields today but if I hold them to maturity, I will get the original YTM. If I have a Treasury earning 2.8 to 3.2% with maturities from 3-18 mos and currently secondary market issues are now yielding 3.4 to 4.2% why wouldn't I want to do this comparison? That's what I'm asking :-)
If you see that a 52-week Treasury has a YTM of 4.2% in the secondary market, and you also own a Treasury that matures in 52-weeks then your Treasury also has a YTM of at least 4.2%.

You will get the original YTM from your original purchase date to the maturity. But even securities you own, you will get the current YTM from the current date.
Please clarify: If today I were to buy a 2-year treasury at 4.49 yield, aren't I locking in my twice yearly coupon rate at 4.49% irrespective of what fluctuations happen in future? Or have I been thinking wrong since I started buying nominal treasuries 6 months ago? The way you wrote your reply above, it sounds like my coupon rate will reflect future current yields on "my" treasury, not the 4.49 yield I presumed I locked in for a two year period.
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Re: Trading Treasuries (nominal and TIPS)

Post by billyt »

There is a confusion here between the original price and yield and the current one. As usual, Vineviz has it totally correct. Yes, once you buy a treasury your coupons are locked in. You will earn your original expected yield; but only if you hold to maturity. If you are considering selling, then you must take into account the current market price and yield of your bond. Nonnie was mistakenly comparing his original yields to current market yields. The correct comparison is his bonds current yield to other market yields.
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Re: Trading Treasuries (nominal and TIPS)

Post by kacang »

Is anyone else experiencing the same issue at Fidelity? Both treasury and TIPS new issue auction pages are showing no offerings when I logged into my Fidelity 401K account.
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

GetSmarter wrote: Thu Oct 13, 2022 10:49 am
vineviz wrote: Tue Sep 27, 2022 5:57 am
nonnie wrote: Mon Sep 26, 2022 8:38 pm Thanks for your response but I'm not sure I understand--perhaps I was unclear? Yes, they have higher yields today but if I hold them to maturity, I will get the original YTM. If I have a Treasury earning 2.8 to 3.2% with maturities from 3-18 mos and currently secondary market issues are now yielding 3.4 to 4.2% why wouldn't I want to do this comparison? That's what I'm asking :-)
If you see that a 52-week Treasury has a YTM of 4.2% in the secondary market, and you also own a Treasury that matures in 52-weeks then your Treasury also has a YTM of at least 4.2%.

You will get the original YTM from your original purchase date to the maturity. But even securities you own, you will get the current YTM from the current date.
Please clarify: If today I were to buy a 2-year treasury at 4.49 yield, aren't I locking in my twice yearly coupon rate at 4.49% irrespective of what fluctuations happen in future? Or have I been thinking wrong since I started buying nominal treasuries 6 months ago? The way you wrote your reply above, it sounds like my coupon rate will reflect future current yields on "my" treasury, not the 4.49 yield I presumed I locked in for a two year period.
Yield is not the same as coupon rate. The closest thing to a 2-year Treasury is the 10/15/2024 with a coupon rate of 0.625% and a yield of 4.452% (for min qty 500).

You will receive semi-annual coupon payments of one half the coupon rate times your face value. If you hold to maturity, your internal rate of return (IRR) will be very close to your original yield to maturity. Your investment return will be slightly different than your IRR because it depends on coupon reinvestment rates.

However, none of this has anything to do with what the yield on this Treasury note will be a year from now (or at any time before maturity), which is what the original confusion was about.

Kevin
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Re: Trading Treasuries (nominal and TIPS)

Post by jeffyscott »

kacang wrote: Thu Oct 13, 2022 1:22 pm Is anyone else experiencing the same issue at Fidelity? Both treasury and TIPS new issue auction pages are showing no offerings when I logged into my Fidelity 401K account.
Looks like there's no auctions expected until the 26th and that's not open for bids until the 20th. So they are probably all outside the range that Fidelity chooses to show.
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Re: Trading Treasuries (nominal and TIPS)

Post by kacang »

jeffyscott wrote: Thu Oct 13, 2022 1:36 pm
kacang wrote: Thu Oct 13, 2022 1:22 pm Is anyone else experiencing the same issue at Fidelity? Both treasury and TIPS new issue auction pages are showing no offerings when I logged into my Fidelity 401K account.
Looks like there's no auctions expected until the 26th and that's not open for bids until the 20th. So they are probably all outside the range that Fidelity chooses to show.
That's weird. I received email notifications from Treasury auction about the following offerings (there were others but these are the ones I am interested in). Am I too early to look for them in Fidelity now?

CUSIP: 91282CFR7
Term and Type: 5-Year TIPS
Offering Amount: $21,000,000,000
Auction Date: 10/20/2022
Issue Date: 10/31/2022
Maturity Date: 10/15/2027

CUSIP: 912796XS3
Term and Type: 13-Week Bill
Offering Amount: $57,000,000,000
Auction Date: 10/17/2022
Issue Date: 10/20/2022
Maturity Date: 01/19/2023
Last edited by kacang on Thu Oct 13, 2022 1:43 pm, edited 1 time in total.
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

jeffyscott wrote: Thu Oct 13, 2022 1:36 pm
kacang wrote: Thu Oct 13, 2022 1:22 pm Is anyone else experiencing the same issue at Fidelity? Both treasury and TIPS new issue auction pages are showing no offerings when I logged into my Fidelity 401K account.
Looks like there's no auctions expected until the 26th and that's not open for bids until the 20th. So they are probably all outside the range that Fidelity chooses to show.
There were three Treasuries auctioned today: 4-week, 8-week, and 29-Year 10-Month bond. Next announced auction is on 10/17 for 13-Week and 26-Week. There's another one on 10/19/2022 for the 19-Year 10-Month bond, and one on 10/20 for the 5-year TIPS. The last four auctions were announced today, and do not appear yet at Fidelity.

Kevin
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Re: Trading Treasuries (nominal and TIPS)

Post by jeffyscott »

Kevin M wrote: Thu Oct 13, 2022 1:41 pm
jeffyscott wrote: Thu Oct 13, 2022 1:36 pm
kacang wrote: Thu Oct 13, 2022 1:22 pm Is anyone else experiencing the same issue at Fidelity? Both treasury and TIPS new issue auction pages are showing no offerings when I logged into my Fidelity 401K account.
Looks like there's no auctions expected until the 26th and that's not open for bids until the 20th. So they are probably all outside the range that Fidelity chooses to show.
There were three Treasuries auctioned today: 4-week, 8-week, and 29-Year 10-Month bond. Next announced auction is on 10/17 for 13-Week and 26-Week. There's another one on 10/19/2022 for the 19-Year 10-Month bond, and one on 10/20 for the 5-year TIPS. The last four auctions were announced today, and do not appear yet at Fidelity.

Kevin
Sorry, I misread vanguard, I had looked there since they seem to list ones that are further out.
kacang
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Re: Trading Treasuries (nominal and TIPS)

Post by kacang »

Looks like I was too early. The treasuries are appearing now as we speak, no sign of TIPS yet. Will wait.

I am not impressed with Fidelity customer service. When I called to ask about this, they bounced me around. One CS told me they are sold out, another CS told me there is no offering currently, the 3rd one put me on hold for so long I gave up waiting.
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Re: Trading Treasuries (nominal and TIPS)

Post by sherlock21 »

I was able to place an order on Vanguard for 5 year TIPS auction:

==
Product description
Issue T Tips (Tips)
CUSIP 91282CFR7
Product type Treasury
Coupon 1.875
Maturity 10/15/2027
Pay frequency Semiannual
Moody's / S&P NR / /NR
==
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

Today I bought more of the 10/15/2024 TIPS for DW (yesterday I bought her more of the 7/15/24). I noticed that the SA yield pretty much equals the quoted ask yield. Of course it does, since settlement mm/dd and maturity mm/dd are only one day apart (10/14 vs 10/15). The SA price adjustment factor is only 1.00005.

Image

Her yield was 1.65% vs. 1.67% or so for large quantity, so happy with that.

Here are her holdings as % of total vs. maturity:

Image

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Re: Trading Treasuries (nominal and TIPS)

Post by gasman »

Kevin,

Thanks for your posts. :beer

Question: Why do you keep your maturities so short? For the first time in a while, we can get real yields in the range of 1.6% on a ten year TIPs. Not a back up the truck type of moment, but the best thing that we have seen for years. What would be your criteria for extending maturities of your TIPs holdings?
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Re: Trading Treasuries (nominal and TIPS)

Post by Kevin M »

gasman wrote: Thu Oct 13, 2022 3:50 pm Kevin,

Thanks for your posts. :beer

Question: Why do you keep your maturities so short? For the first time in a while, we can get real yields in the range of 1.6% on a ten year TIPs. Not a back up the truck type of moment, but the best thing that we have seen for years. What would be your criteria for extending maturities of your TIPs holdings?
That's just my personal preference. I plan to continue extending maturities gradually, and probably will buy some of the 204X TIPS soon if yield is a bit above 2%. Given the yield curve inversion from 3.5-year to 9.8-year, I'm more inclined to move toward moving toward a barbell with 204X maturities at the long end.

Image

Kevin
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Re: Trading Treasuries (nominal and TIPS)

Post by hoops777 »

Kevin M wrote: Thu Oct 13, 2022 4:21 pm
gasman wrote: Thu Oct 13, 2022 3:50 pm Kevin,

Thanks for your posts. :beer

Question: Why do you keep your maturities so short? For the first time in a while, we can get real yields in the range of 1.6% on a ten year TIPs. Not a back up the truck type of moment, but the best thing that we have seen for years. What would be your criteria for extending maturities of your TIPs holdings?
That's just my personal preference. I plan to continue extending maturities gradually, and probably will buy some of the 204X TIPS soon if yield is a bit above 2%. Given the yield curve inversion from 3.5-year to 9.8-year, I'm more inclined to move toward moving toward a barbell with 204X maturities at the long end.

Image

Kevin
I know nobody has a crystal ball but would like to know if you and the other really experienced people here think tips and nominals will be higher in January or?
I have a lot of short term stuff maturing that I would like to switch into the 5 - 10 year range.
Thanks
K.I.S.S........so easy to say so difficult to do.
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Re: Trading Treasuries (nominal and TIPS)

Post by vineviz »

hoops777 wrote: Thu Oct 13, 2022 5:11 pm
I know nobody has a crystal ball but would like to know if you and the other really experienced people here think tips and nominals will be higher in January or?
I have a lot of short term stuff maturing that I would like to switch into the 5 - 10 year range.
Thanks
There’s really no way to even guess.

If you have bonds maturing in January, they should be close to par now. I’d take the bird in hand, so to speak, and consider selling some of the 3 month bonds and buying the 10 year bonds if I were in your position.

Even moving a little bit now would provide some assurances of getting the current yields.
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Re: Trading Treasuries (nominal and TIPS)

Post by hoops777 »

vineviz wrote: Thu Oct 13, 2022 6:14 pm
hoops777 wrote: Thu Oct 13, 2022 5:11 pm
I know nobody has a crystal ball but would like to know if you and the other really experienced people here think tips and nominals will be higher in January or?
I have a lot of short term stuff maturing that I would like to switch into the 5 - 10 year range.
Thanks
There’s really no way to even guess.

If you have bonds maturing in January, they should be close to par now. I’d take the bird in hand, so to speak, and consider selling some of the 3 month bonds and buying the 10 year bonds if I were in your position.

Even moving a little bit now would provide some assurances of getting the current yields.
Thanks.
What do you think is the best right now for 5 to 10 years, tips or nominal and they are in my IRA.
Also Apple and Amazon have some 5 year bonds at about 4.8 which look good to me.
K.I.S.S........so easy to say so difficult to do.
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