tag:blogger.com,1999:blog-6616959642391988608.post8820498110705425232..comments2024-03-28T00:18:25.641-07:00Comments on Calafia Beach Pundit: TIPS update (2)Scott Grannishttp://www.blogger.com/profile/14028519647946868684noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-6616959642391988608.post-16762879058291125152009-06-08T13:18:07.638-07:002009-06-08T13:18:07.638-07:00I think there are two major forces that will impac...I think there are two major forces that will impact the bond market: 1) the strength or weakness of the economy and 2) the size of the federal deficit.<br /><br />As long as the market sees the economy as weak or very weak, the government can probably sell a whole lot of bonds without causing interest rates to rise very much. <br /><br />But as soon as the market senses that the economy is not Scott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-17937930733838305622009-06-08T12:56:16.631-07:002009-06-08T12:56:16.631-07:00I'm trying to get a handle on what the Fed and...I'm trying to get a handle on what the Fed and the bond market will be doing in response to the impending deficit problem. I.e., the federal government has to sell a lot more debt instruments over the next 5+ years to cover growing deficits. Supply & demand seems to indicate that selling more notes means the rates must be sweetened. <br /><br />If the Fed Funds Rate is increased, and bitbucket255https://www.blogger.com/profile/16244170535171103696noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-26767526854738304072009-06-07T17:58:18.821-07:002009-06-07T17:58:18.821-07:00TIPS have two prices: the one that changes as real...TIPS have two prices: the one that changes as real yields change (the market price), and the one that is adjusted daily by the CPI. The market price is indeed subject to the risk that real yields rise. Typically, real yields rise as the expectation of future Fed tightening rises. I've done a lot of research which shows that the real yield on TIPS is heavily influenced by the market's Scott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-5650469355974426492009-06-06T11:20:25.156-07:002009-06-06T11:20:25.156-07:00I appreciate your view that the transactions costs...I appreciate your view that the transactions costs of owning individual TIPS can be prohibitive, but I'm curious about your thoughts on the interest rate risks carried by TIP and VIPSX. I know that the pricing of TIPS funds is very complicated, but from my distant and not very informed vantage point, it has appeared to me over the past year that VIPSX responses to interest rate changes are lb100https://www.blogger.com/profile/12982706469476724785noreply@blogger.com