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Home > Buying a TIPS from Treasury Direct - Part 3

Buying a TIPS from Treasury Direct - Part 3

July 17th, 2007 at 08:46 am

Yesterday, funds were automatically withdrawn from my checking account for my TIPS purchase. It was recorded by my bank overnight, so I could see the amount withdrawn this morning.

The amount withdrawn was $2,968.47 for my $3,000 TIPS, based on a purchase price of $98.922415 per $100. I paid 20-cents more than what I had calculated based on the published auction results, and I don't exactly know why.

Coincidentally, I also received interest payments yesterday from the US Treasury for TIPS I had purchased in the past. I get interest payments automatically deposited to my checking account every 6 months. So, on the same day I had money coming from and going to the US Treasury. [It was pure coincidence, and I don't think that has ever happened before.]

If I were retired or near retirement age, I think I would be putting a much larger percentage of my money in TIPS, as a way to keep my principal secure and make sure my money earned at a rate a bit ahead of inflation. I read somewhere that John Bogle, the founder of Vanguard, has moved a larger percentage of his portfolio to TIPS as he has gotten older.

Regarding short-term US Treasuries (T-Bills), the interest rate from yesterday's auction was the highest in 3 months:
6-month T-Bill (Rate 4.865% / Yield 5.071%)
3 month T-Bill (Rate 4.840% / Yield 4.982%)
They're not quite up there with the best MMAs or short-term CDs yet, but they are getting close. It might be time to start thinking about T-Bills again ...

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