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Author: ssalz Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35367  
Subject: TIPS another question Date: 12/8/2008 10:04 AM
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Barrons TIPS pricing section lists short maturity tips with a yield to maturity of 6.6%. This is the 4.25 01/10 Bid 97-14.

Two questions, how do they calculate YTM, (I know how they do it with conventional bonds) does this include the anticipated increase in NAV with the inflation fix next year? and secondly how easy is it to buy tips on the open market (not new issue)?

Thanks, Dr. Steve
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Author: TMFGalagan Big gold star, 5000 posts CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 25265 of 35367
Subject: Re: TIPS another question Date: 12/8/2008 10:48 AM
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Two questions, how do they calculate YTM, (I know how they do it with conventional bonds) does this include the anticipated increase in NAV with the inflation fix next year? and secondly how easy is it to buy tips on the open market (not new issue)?

To get YTM, the calculation is similar to how you do conventional bonds, with the numbers assuming no inflation adjustment. So a 4.25% coupon bond priced at par (unadjusted for inflation) would likely have a YTM of 4.25%. Make sure you look at the unadjusted price numbers and not the ones that take the current inflation indexed value into account.

I have a Fidelity brokerage account and find it easy to buy TIPS on the secondary market. I think others have equally good experiences with Vanguard. The spreads are wide enough that you don't really want to trade them, but if you intend to hold to maturity, the prices are reasonable.

good luck,
dan

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Author: ssalz Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 25266 of 35367
Subject: Re: TIPS another question Date: 12/8/2008 11:08 AM
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Thanks, Dr. Steve

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