Culture
Recycles dryer sheets
- Joined
- Apr 15, 2007
- Messages
- 491
I note that TIPS yields are near historic highs, currently at 3.76% real for 7 year bonds. I also note that VIPSX has fallen 15% in the past 15 months, and 11% in the past 2.5 months.
I assume that the drop in VIPSX is a result of the interest rate risk, as the real yield was 1.2% 2.5 months ago. My question is this: If I am willing to accept that real yields are not going to go significantly higher than they already are, is there any reason to purchase individual TIPS as opposed to VIPSX? The effectve yield of VIPSX is the same as curernt TIPS due to the discount in principal (i.e. I am paying 15% less per share to account for the fact that the normial yield of the underlying bonds is actually on the order of 2%).
Am I correct? I hope so, as I just shifted $220,000 from my treasury money market fund into VIPSX. This is long term cash, not near term.
Did I miss something?
I assume that the drop in VIPSX is a result of the interest rate risk, as the real yield was 1.2% 2.5 months ago. My question is this: If I am willing to accept that real yields are not going to go significantly higher than they already are, is there any reason to purchase individual TIPS as opposed to VIPSX? The effectve yield of VIPSX is the same as curernt TIPS due to the discount in principal (i.e. I am paying 15% less per share to account for the fact that the normial yield of the underlying bonds is actually on the order of 2%).
Am I correct? I hope so, as I just shifted $220,000 from my treasury money market fund into VIPSX. This is long term cash, not near term.
Did I miss something?
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