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How to Hedge Inflation - tax issues w VTIP.
Old 03-07-2016, 03:50 PM   #1
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How to Hedge Inflation - tax issues w VTIP.

Inflation: How‚€”and Why‚€”to Hedge It Now - Barron's

This weeks Barron's has an article "How to Hedge Inflation-and Why Now" recommending using short term TIP funds as their yield spread vs coupon Treasuries is very low, making TIPs relatively more attractive/cheap.

VTIP is Vanguard 2.6 yr duration Tip fund. My question involves tax treatment in a taxable account. As there is both coupon and "imputed(?)" interest, how do you keep track of your cost basis?

Also, they mention some closed end funds that are selling at historically high discounts to NAV, WIW and WIA. Anyone have any experience with tax aspects of these?

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Old 03-07-2016, 03:57 PM   #2
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Seems like Barron's maybe sat on the story for too long.

I bought 5 yr TIPS at the last auction in December because the real yield had climbed to 40bp. Today they're quoted at 6bp.

As to your original question, each TIPS has it's own CPI reference date and index ratio so you can keep track of the inflation accrual.

I have no idea how the funds work because whenever I buy TIPS I buy them directly at auction. I'm looking to sell mine now if you're interested.
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