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iShares TIPS Bond Message Board

  • markm0722 markm0722 Jan 18, 2011 11:43 PM Flag

    Yield Curve Analysis

    This message board has officially died.

    Meanwhile, the Apple message board has about 2 posts per minute, lol.

    Call me a contrarian but I'm feeling pretty good about my long-term decision to own long-term TIPS. :)

    For those interested, I did some treasury yield curve analysis today.

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    • Mark
      First I have to thank you for all your valuable posts. Second, could you please give me some education on buying/selling tips on second market? The other day you said you just bought 29 year tips. You bought on second market right? Is there fees, ect...for that? Thanks.

      • 1 Reply to leuyenl
      • That 29 year TIPS was my first purchase on the secondary market. I normally just buy directly from the government through Treasury Direct. This purchase was inside my IRA though so I could not do that. In the past, my IRA sat in TIP and I was mostly fine with that. Now that the yield curve is so steep I'd rather just go long and hold until maturity. The thought of owning 5-Year TIPS paying negative real interest just doesn't appeal to me, especially for the money I won't be needing for 30 years.

        I bought it through Ameritrade (and I used their tutorial before buying). I have yet to figure out how much I actually paid in fees. I doubt I will ever figure it out. It was built into the price of the bond on a "net yield basis". In other words, the yield I got was slightly smaller than the market yield. This makes it amazingly difficult to figure out how much I paid in fees. I did not know the exact market yield at the time I placed my order, so there is no way I can even reverse engineer the fees.

        Ameritrade claims that I got a yield to maturity of 1.86517%. That's the rate I'll be earning over inflation for the next 29 years. Works for me!

        From here on out I could care less what the market thinks that bond is worth. I know almost exactly what it will be worth to me at maturity. That's all that matters. It is also nice to know that I should never need to find a greater fool to buy it from me.

        Is it safe? Not really. The USA could default, hyperinflate, or even confiscate my IRA. What would be safe in that environment though? Not much.

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