Thank you for this, it's a bit to digest. I imagine the 1/1/2025 won't apply until next year?This is the correct method.Make a rough estimate of what the Reference CPI for TIPS will be on 10/15/2024 (the next interest date) and on 01/01/2025.These are the values if one assumes a 315.000 Reference CPI on both 10/15/2024 and 1/1/2025. I make slightly different estimates ofThe values I am using result in the next interest payment being $30.39 and the inflation adjustment for the year being $1,134.95.
314.546 on 10/15/2024 and 314.175 on 1/1/2025. [1] 314.175 is the Reference CPI on 9/1/2024. Given this, the interest and OID shown on TIPS Interest & OID for 2024 (until 09/01/24) is applicable except that I need to add an estimate for October interest and slightly tweak the OID for the TIPS maturing 10/15/2024. [2] Here is that modification. It shows amounts per $1,000 of face value.Code:
------------------------ I n t e r e s t -------------------------- Matures Coupon Jan Feb Apr Jul Aug Oct Total OIDCode:
1/15/2024 0.625% 4.1169 4.1169 -1.20 4/15/2024 0.500% 3.0660 3.0660 6.49 7/15/2024 0.125% 0.8091 0.8259 1.6350 25.7410/15/2024 0.125% 0.7535 0.7663 1.5198 26.80 [2] 1/15/2025 2.375% 19.3652 19.7678 39.1330 34.51 1/15/2025 0.250% 1.6223 1.6560 3.2783 27.46 4/15/2025 0.125% 0.7484 0.7611 1.5095 25.18 <=== 7/15/2025 0.375% 2.4304 2.4810 4.9114 27.4310/15/2025 0.125% 0.7451 0.7577 1.5028 25.06 1/15/2026 2.000% 15.4875 15.8095 31.2970 32.77 1/15/2026 0.625% 4.0427 4.1268 8.1695 27.37 4/15/2026 0.125% 0.7372 0.7497 1.4869 24.80 7/15/2026 0.125% 0.8015 0.8182 1.6197 27.1310/15/2026 0.125% 0.7075 0.7195 1.4270 23.80 1/15/2027 2.375% 18.1007 18.4771 36.5778 32.25 1/15/2027 0.375% 2.3860 2.4356 4.8216 26.92 4/15/2027 0.125% 0.6847 0.6963 1.3810 23.04 7/15/2027 0.375% 2.3561 2.4052 4.7613 26.5910/15/2027 1.625% 8.4837 8.6274 17.1111 21.95 1/15/2028 1.750% 12.8388 13.1058 25.9446 31.05 1/15/2028 0.500% 3.1155 3.1803 6.2958 26.37 4/15/2028 3.625% 34.6619 35.2489 69.9108 40.21 4/15/2028 1.250% 6.4450 6.5541 12.9991 21.69 7/15/2028 0.750% 4.5922 4.6877 9.2799 25.9110/15/2028 2.375% 11.9919 12.1950 24.1869 21.23 1/15/2029 2.500% 17.8966 18.2688 36.1654 30.29 1/15/2029 0.875% 5.3260 5.4368 10.7628 25.76 4/15/2029 3.875% 36.4543 37.0717 73.5260 39.57 4/15/2029 2.125% 10.8049 10.8049 12.65 [3] 7/15/2029 0.250% 1.5021 1.5334 3.0355 25.43 1/15/2030 0.125% 0.7467 0.7623 1.5090 25.28 7/15/2030 0.125% 0.7493 0.7649 1.5142 25.36 1/15/2031 0.125% 0.7380 0.7534 1.4914 24.99 7/15/2031 0.125% 0.7168 0.7317 1.4485 24.26 1/15/2032 0.125% 0.6931 0.7075 1.4006 23.47 4/15/2032 3.375% 29.4060 29.9040 59.3100 36.64 7/15/2032 0.625% 3.3062 3.3749 6.6811 22.39 1/15/2033 1.125% 5.8047 5.9254 11.7301 21.84 7/15/2033 1.375% 6.9584 7.1030 14.0614 21.41 1/15/2034 1.750% 8.9320 8.9320 23.11 [3] 7/15/2034 1.875% 0.39 [3] 2/15/2040 2.125% 15.0868 15.4414 30.5282 30.10 2/15/2041 2.125% 14.8903 15.2403 30.1306 29.70 2/15/2042 0.750% 5.0933 5.2130 10.3063 28.79 2/15/2043 0.625% 4.1715 4.2695 8.4410 28.29 2/15/2044 1.375% 9.0533 9.2661 18.3194 27.91 2/15/2045 0.750% 4.8874 5.0022 9.8896 27.62 2/15/2046 1.000% 6.4763 6.6285 13.1048 27.45 2/15/2047 0.875% 5.5623 5.6931 11.2554 26.94 2/15/2048 1.000% 6.2228 6.3691 12.5919 26.37 2/15/2049 1.000% 6.0982 6.2415 12.3397 25.84 2/15/2050 0.250% 1.4922 1.5272 3.0194 25.30 2/15/2051 0.125% 0.7368 0.7541 1.4909 24.98 2/15/2052 0.125% 0.6890 0.7052 1.3942 23.36 2/15/2053 1.500% 7.7435 7.9255 15.6690 21.88 2/15/2054 2.125% 10.8747 10.8747 24.17 [3]For the April 2025's 40,000 face value in the original post, the values would beCode:
Total 136.5028 88.2037 134.8852 144.0710 101.1514 144.8566 749.6707 1,412.09Code:
60.38 = 40 * 1.5095 = interest1,007.20 = 40 * 25.18 = OID (aka inflation adjustment)My figures above only show estimated coupon interest and OID (aka inflation adjustment) for 2024. They do not include the taxable amount resulting from purchasing at a discount. However, if you hold it until redemption in 2025, the purchase discount won't be taxed in 2024.... I am not sure how the return is taxed entirely since it was purchased at a discount.
- My estimated 10/15/2024 Reference CPI of 314.546 is 0.118% higher than the last known Ref CPI of 314.175 on 9/1/2024. (See this webpage for daily Reference CPI values in 2024.) For 1/1/2025 I'm estimating the Ref CPI will be unchanged from 9/1/2024. I make these estimates by calculating how much the Reference CPI would need to change for the nominal return of one TIPS maturing 10/15/2024 and two TIPS maturing 1/15/2025 to equal the yield of nominal Treasuries maturing on those dates. For these estimates I use prices and yields from Friday's WSJ TIPS Quotes and WSJ Treasury Quotes.
- For the TIPS maturing 10/15/2024 the Ref CPI would need to increase 0.118% as shown in cell B22 below. I presented this calculation in this post in another thread.
- For the two TIPS maturing 1/15/2025 the Ref CPI would need to decrease 0.036% for one and increase 0.007% for the other as shown in cells C22 and D22 below. So I'm assuming no change from the Ref CPI on 9/1/2024. I'm also assuming the Ref CPI on 1/1/2025 is the same as the one on 1/15/2025.
Code:
Row Col A Col B Col C Col D Formula in Column B 2 Face value 10,000 10,000 10,000 3 Settlement 7/29/2024 7/29/2024 7/29/2024 4 Last Reference CPI date 9/01/2024 9/01/2024 9/01/2024 5 Maturity 10/15/2024 1/15/2025 1/15/2025 6 Coupon 0.125% 0.250% 2.375% 7 Price 99.09375 97.84375 98.84375 8 Index Ratio 7/29/2024 1.22393 1.32579 1.66591 9 Index Ratio 9/01/2024 1.22454 1.32645 1.66674 10 Target nominal return 5.213% 5.056% 5.056%Code:
11 Yield to maturity 4.416% 5.026% 4.930% =YIELD(B3,B5,B6,B7,100,2,1) 12 Interest period starts 4/15/2024 7/15/2024 7/15/2024 =COUPPCD(B3,B5,2,1) 13 Total days in period 183 184 184 =B5-B12 14 Days to settlement 105 14 14 =B3-B12 15 Days after settlement 78 170 170 =B5-B3 16 Days after last Ref CPI 44 136 136 =B5-B4 17 Real cost 9,912.96 9,785.33 9,893.41 =B2*(B7/100+(B6/2)*(B14/B13)) 18 Real proceeds 10,006.25 10,012.50 10,118.75 =B2*(1+B6/2) 19 Nominal cost 12,132.77 12,973.29 16,481.53 =B17*B8 20 Nominal proceeds 12,267.56 13,276.30 16,866.48 =B19*(1+(B10/2)*(B15/B13)) 21 Index ratio 10/15/2024 1.22599 1.32597 1.66685 =B20/B18 22 Increase from 9/1/2024 0.118% -0.036% 0.007% =B21/B9-1- I'm estimating 26.80 OID for the TIPS maturing 10/15/2024 instead of 25.35 from this webpage which uses the 314.175 Ref CPI on 9/1/2024.
- The OID for these TIPS is measured from their initial issuance dates of 4/30, 1/31, 7/31, and 2/29 respectively.
Statistics: Posted by gavinsiu — Mon Jul 29, 2024 9:54 am — Replies 11 — Views 696