DaveLeeNC
Recycles dryer sheets
I am considering adding a substantial position in TIPS bonds (not a fund) to my tax deferred portfolio. I think that I understand how these vehicles work. I am NOT SURE that I understand the terminology that is often used. So I am going to pull some data from https://www.wsj.com/market-data/bonds/tips to frame my question.
Maturity - July 15, 2026
Coupon - 0.125
Bid/Asked - 99.24/99.27
Yield - 0.165
Accrued Principal - 1123
So what we have here is a original coupon (0.125) TIPS bond at $1000 initial par value. It matures (you get your inflation adjusted principal back) on 7/15/26.
The periodic payments (annualized I am assuming) in this case are .00125
x Adjusted_Principle_Value (whatever it is at the time)
The price to purchase this bond is .9927 x SOMETHING (I assume that it is the Accrued Principal).
The Accrued Principal is the inflation adjusted value of this bond on today's date.
The yield is just the (inflation adjusted) IRR if this bond is held to maturity.
But there must be something that I don't understand as I don't get a 'Yield' of .165 for the case of zero inflation from this point forward. Where am I confused - thanks.
dave
Maturity - July 15, 2026
Coupon - 0.125
Bid/Asked - 99.24/99.27
Yield - 0.165
Accrued Principal - 1123
So what we have here is a original coupon (0.125) TIPS bond at $1000 initial par value. It matures (you get your inflation adjusted principal back) on 7/15/26.
The periodic payments (annualized I am assuming) in this case are .00125
x Adjusted_Principle_Value (whatever it is at the time)
The price to purchase this bond is .9927 x SOMETHING (I assume that it is the Accrued Principal).
The Accrued Principal is the inflation adjusted value of this bond on today's date.
The yield is just the (inflation adjusted) IRR if this bond is held to maturity.
But there must be something that I don't understand as I don't get a 'Yield' of .165 for the case of zero inflation from this point forward. Where am I confused - thanks.
dave