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Cost estimate for TIPS auction
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Tramper Al
10-18-2006, 9:23 PM | Post #185412 |
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Hi,
I am planning to purchase TIPS bonds, within an IRA, at auction next week. This is the 5-year bond, though it is a reissue of the 4/15/2011 2.375 coupon bond, as I understand it.
My question is how to best estimate my costs, so as to make most effecient use of the cash available funds in the IRA. I don't want to have $2-3K left over, but of course I don't want to have insufficient funds for settlement either.
I believe I can estimate the discount, and thus the cost per bond, pretty well by looking at this bond on the secondary market. Bloomberg has it at a yield of 2.62% and current price 98-31 - that's 31/32nds, I imagine. However, when I have purchased TIPS at auction before, there have been other cost and settlement adjustments related to interest and any mismatch between issue date and settlement date. I can only imagine that these sums may be much more significant with a reissue, since some 6 months have passed since first issue. I also do not know what effect the principle adjustment of a TIPS might have on this.
Can I estimate these price adjustments with some accuracy, so that I can at least choose the correct number of ($1K) bonds to purchase at auction?
I appreciate any help with this . . .
Originally posted in thread: 53969
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