Originally Posted by Stevewc
Maybe the word auction is the wrong term to use.
I understand that the brokerage will do the selling.
I see the price seems to be around 103 for the 5 year tips in the secondary market as of last week.
Will I be charged any type brokerage fee's if the bonds do not sell?
Is the bond market such that I can move/sell these things any time I want to?
I mean "FD" has already said he would not want to buy the 5 year tips.
I can't imagine that your TIPS would not sell, it's a pretty liquid market. If your TIPS were not in demand, the price would go down until they would become attractive again. If Vanguard say the bid price for your bonds is 103, that's what the dealer is willing to pay you right now, so it seems there are buyers of 5-year TIPS out there (just not me
You will be charged a brokerage fee only when the order executes. You can sell them whenever the bond market is open.
Since you are new to trading TIPS on the secondary market, also note that the bid quotes provided by most brokerage firms (VG included) are not as straight forward as they might appear. That's because, unlike nominal bonds, TIPS are quoted in real dollars but traded in nominal dollars.
The bid price quoted by Vanguard is expressed as a percentage of inflation adjusted principal and not as a percentage of face value.
Each one of your bonds has a face value of $1,000.
Your 5-year TIPS maturing in 2013 currently have an index ratio (also called bond factor rate or inflation factor) of ~1.033 according to treasury direct.
Therefore your bonds' inflation adjusted principal is $1,033.
So, if Vanguard's quoted bid price is 103, you will receive (103 x $1,033) / 100 = $1,063.99 for each one of your bonds.
You will also receive the interests accrued by the bond since the last interest payment.