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Old 10-24-2010, 06:45 AM   #21
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Thanks for this insightful/informative discussion on the machinations of bonds and bond trading.

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Old 10-24-2010, 09:22 AM   #22
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Originally Posted by Stevewc View Post
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?
Opinions? Thoughts?
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.

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Old 10-24-2010, 11:41 AM   #23
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OP, do yourself a big favor and just stand pat.
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
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Old 10-24-2010, 02:57 PM   #24
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Originally Posted by haha View Post
OP, do yourself a big favor and just stand pat.
I'm open to your suggestion as well.
Could you enlighten me as to your thinking on this?
Private message or open forum is OK with me.
A big Thank You goes out to everyone,
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Old 10-24-2010, 03:02 PM   #25
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How are things going in retirement and N.A.these days?
If L.A. is lower alabama then I guess you are in N.A., right?
Hope all is well,
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Old 10-24-2010, 05:56 PM   #26
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Originally Posted by FD View Post
I can't imagine that your TIPS would not sell, it's a pretty liquid market.
The secondary market is active. FED has been buying TIPS in addition to regular buyers.

I sold a mid-6 figure block in 15 seconds last week on secondary market. Spreads were small. Watch the volume and spreads and time your sale when the market is stable and volume is good. Usually mid morning or mid afternoon.
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Old 10-24-2010, 07:17 PM   #27
Recycles dryer sheets
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During business hours, Vanguard should be able to quickly sell any of your treasury bond holdings including TIPS. If you need the money, by all means go online to the Vanguard bond desk, read the online help, read the Vanguard fee schedule, then sell whatever you need to sell.

If your situation has changed, so that you now believe your long-term asset allocation should be different than you current asset allocation, or your "reason" for holding TIPS has changed, definitely go to the Vanguard bond desk and sell whatever you need to sell.

However, if your "need to sell" is just based on the idea that by selling you can make a little more money than by holding your TIPS to maturity, then follow haha's advice.
Originally Posted by haha View Post
OP, do yourself a big favor and just stand pat.
You are almost certainly not going to beat the market by churning your own portfolio's holdings. For the vast majority of investors, the more they trade, the more they hurt their portfolio's performance. The market is not perfectly efficient, but it is efficient enough that you are not going to consistently outperform it on a risk adjusted basis after taxes, spreads, and commissions based on publicly available information.

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