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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.
MikeG
 
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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!
B2B_Investing
 
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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.
MikeG
 
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Joined: Tue Aug 02, 2022 9:54 am

Postby DukeWeston » Sat Aug 20, 2022 10:03 am

I fudge the issue in a similar way by entering a price every 3 months. I get the "price" from this Growth in value table.

http://eyebonds.info/ibonds/home10000.html

It's a bit tedious, and I'm not so concerned about accuracy of yields etc but I like to be able to see my total value at glance.
DukeWeston
 
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Postby MikeG » Sun Aug 21, 2022 10:22 pm

If FM reporting of unrecognized I-bond interest isn't important then I agree with not giving too much consideration to the coupon rate. I do find that reported Accrued Interest for an I-Bond is innaccurate unless one enters a coupon rate that generates an Accrued Interest figure that equals Current Value minus Basis.

Also agree that your link is a good reference for a one-page Ibond valuation summary, especially if you're updating price/value less frequently than 1x / month.
MikeG
 
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Joined: Tue Aug 02, 2022 9:54 am

Postby ballardian » Sat Sep 24, 2022 1:34 pm

In esscense what I am doing is just updating the price like you were doing and then not using bond reports but rather Protfolio Performance or other ones I'd use for stocks/etfs. This works for me since the only reason the value increases is b/c of the interest so all the %-Gain etc I just know are b/c of the interest. As for the 3 month penalty I just make the sell price what I get out of the bond. Just as if the price went down and FM records it as such.

However, to make this easy ... long term. I wrote a powershell script that calculates the "prices" for each of my I-Bonds accurate to the penny. Then it automatically dumps all the correct prices into an importable 'Price CSV'. Then I just hit import.

The program takes care of the interest and the 6 month rolling compounding into the "price".

All I have to do for ongoing montly accuracy is:

a) Make sure my I-Bonds are listed in my input CSV (once and done)
b) Append the current interest rate to the rate csv (from Treasury Direct)

Then hit go and it automatically calculates all the prices from the origin of all my bonds to date and dumps them into a single CSV that I can import that updates all the individual bonds.

Takes about 5 minutes to update all my I-Bonds at one time if I am taking my time. And I can do it montly or a year from now it will do all the past months correctly.

I'd be happy to share the script / provide more details if anyone is interested.
ballardian
 
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Postby MikeG » Tue Oct 04, 2022 8:48 pm

Another thoughtful reply for the community. Thanks.
MikeG
 
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