TIPS (Treasury Inflation Securities) again

[dlevy]

There have been a couple of threads on the forum about TIPS (https://www.fundmanagersoftware.com/forum/viewtopic.php?f=3&t=1566 and https://www.fundmanagersoftware.com/forum/viewtopic.php?f=6&t=3211&p=12070). The consensus seems to be to store price * factor in the price field and things behave reasonably well.

I was doing this automatically through the Schwab OFX feed until March 16, 2015 when Schwab changed how they price TIPS. Now Schwab sends the price in the price field and not price * factor. My portfolio took a nosedive that day!

Two questions.

(1) Is there an automated way for me to (a) get the factor; and (b) put price * factor in the price field?

(2) What is the impact of this change on calculating amortization for bond premiums. I'm not completely sure that FM was doing the right thing before (although the numbers seemed close enough), but I worry that things are going to be worse now.

BTW, the question of factors also arises with mortgaged backed securities such as GNMAs.

Thanks,

David

[Mark]

Hi David,

1) Not that I know of..., other than through your broker if they happen to include the factor in the price. It might be interesting to look at the xmldump.txt log file after you retrieve transactions or reconcile your account, and see if there is any sign of the factor?

2) FM's accretion and amortization calculator only supports fixed coupon rates. It may not be appropriate for a variable rate debt instrument. You can read about this in the IRS publication 1212. Fund Manager uses what is described as the "constant yield method" for this calculation. That publication does describe how to handle "Inflation-­Indexed Debt Instruments". You may want to use the OID reported by your broker as opposed to that calculated by Fund Manager for these types of investments. You can still record the accretion/amortization the same way, but just enter your own numbers, instead of using Fund Manager's calculator.

[dlevy]

Looking at the xmldump.txt file, I see the following for a TIP:

- POSDEBT
- INVPOS
- SECID
- UNIQUEID (912810PZ5)
- UNIQUEIDTYPE (CUSIP)
- HELDINACCT (OTHER)
- POSTYPE (LONG)
- UNITS (100000.0000)
- UNITPRICE (129.5625)
- MKTVAL (141225.72)
- DTPRICEASOF (20150324210000)
- MEMO (UST INFL IDX 2.5%01/29INFL INDEX DUE 01/15/29)

So, the factor does not appear directly, but given units, unitprice, and mktval, you can calculate the factor, or better, calculate factor*price = mktval/unitprice.

It would be great if the import could identify the security as a TIP (from the memo field) and put mktval/unitprice as the price rather than unitprice.

Absent that, is there some way I can automate the process?

Thanks,

David

[Mark]

Hi David,

Thanks for the log file, that is interesting. Currently, Fund Manager just uses the UNITPRICE for updating closing prices. It isn't a reliable practice to use anything from the MEMO field, but we could make it a user-controlled (advanced) option whether to use UNITPRICE or MKTVAL / UNITS to update the closing price. Normally those would be the same, except for cases like we're describing here. We'll investigate making this option available for the next major update.

Sorry, but I don't see an easy way for you to automate the process in the mean time...

[dlevy]

Thanks. I would like the option to import MKTVAL / UNITS into the price field. Might I suggest that with this you also write an import log showing situations where this number was different from UNITPRICE? Just to make sure there are no surprises...

Best,

David

[Mark]

Hi David,

Okay, thanks for the help and feedback, we'll see what we can do for the next major update.

[jbaron]

I'd like to chime in and say that I still use Fund Manager to manage my own personal portfolio, as I have for 4 years now, and I am still waiting for better TIPS support re. the inflation factor. Currently, I have to manually adjust the "multiply retrieved price by" factors for a number of securities in my portfolio a few times a year. This is a real PITA!

Thanks,

Jeff

[dlevy]

It looks like the new Beta will allow you to elect to import Market Value/quantity instead of price which will take care of the absent TIPS factor (at least in part). Thanks!