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I-Bond setup

Questions about updating prices or transactions in Fund Manager

Postby MikeG » Tue Aug 02, 2022 11:37 am

Can you suggest a way to setup, update and report on I-Bond monthly progress? I understand FM doesn't support variable rate bonds per se, but are there reasonable workarounds so everything hangs together within FM?

I-Bonds differ from normal bonds:
1) Interest accrues monthly and compounds every 6 months. Current I-Bond market values are published monthly by the US Treasury.
2) Interest adjusts every 6 months
3) A 3-month interest penalty is assessed if the bond is sold within the first 5 years. The penalty is reflected in the bond's published monthly market price.

I'm currently using a purchase price of 100 and update the price monthly to (market value/face value*100). In order to get a reasonable value of Accrued Interest in the Bond Summary, I have to guesstimate the coupon rate every month so that (Market Value - Face Value = Accrued Interest). There are also issues with the Bond Summary I-Bond YTM and Current Yield calculations.

Thanks for any suggestions.
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Joined: Tue Aug 02, 2022 9:54 am

Postby B2B_Investing » Tue Aug 02, 2022 4:58 pm

If you are an AAII memeber they had a good article about this a month or two back. Since the interest compounds every six months, only the first and last months calculations in a six month cycle (unless you purchased the bond on the last day of the month) will be a little wonky since they are partial months. The issue is less the rate, which is known, but rather the amount of the interest accrued per month. The AAII article references his excel formula which he claims gets it to the penny each month for his monthly entries.

Honestly I just record it in FM every six months at compounding. I set it up as a bond with a price of $100 and record the interest as the rate changes. Most of the time the rate is not >9% so the accrued interest is closer to ~$1-3/month per thousand. Would it be nice to record it monthly to be precise, sure, but it is not worth the bookkeeping cost to me to mark to market. It is too small a percentage of the total portfolio, earned income, etc to be worth the effort. I run into a similar issue with the quarterly fees in 401k accounts that lack OFX servers. I prefer to spend the time hunting for alpha as I am managing my own money. I just accept what is (to me) a very small tracking error.

I have not found a solution to the YTM, expected yield or expected income quandary you allude to. A good solution to the expected yield would help as I try to manage what the blended expected yield is for the basked of investments I lump in to the same goal as the I-Bonds. I usually resort to quick "back of envelope math". Not elegant but again, balances the time, cost, benefit equation.

Good luck!
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Joined: Wed Mar 19, 2014 8:44 am

Postby MikeG » Wed Aug 03, 2022 11:12 am

Thanks for the in-depth reply. It's at least good to know I'm not the only one with this issue.
Posts: 2
Joined: Tue Aug 02, 2022 9:54 am

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