Some readers are reporting discrepancies. Any ideas?
By David Enna, Tipswatch.com
After I posted my article on Thursday’s reopening auction of CUSIP 91282CFR7, creating a 4-year, 10-month TIPS, several readers reported discrepancies in the pricing being reported by their brokers. In some cases, the broker may have charged a commission or fee. But that is baffling, because many brokers claim to execute Treasury auction purchases with zero commissions or fees for online orders.
This pricing ought to be clear-cut. It should exactly match the prices reported by the U.S. Treasury after the auction closed at 1 p.m. Thursday. Here is the Treasury’s summary:
And here is my estimation of the investment’s cost based on that Treasury data:
I can understand that different brokers will have different ways of detailing the cost. For example, Vanguard reports the unadjusted cost, the adjusted principal, and then the result of this simple calculation:
Unadjusted cost (as a factor like 1.00555894) x adjusted principal = investment cost
My only experience is at Vanguard for brokerage purchases at Treasury auctions, and their reporting system seems quite clear-cut. Other brokers may list different factors, but the resulting investment cost should be the same. For Thursday’s auction, the adjusted cost was $101.135096 for $100 of value. On top of that cost was accrued interest of $3.41240 per $1,000 of value.
I am not sure why some readers seeing differing costs, while others are seeing costs that match the Treasury’s reporting. But I suspect brokers are adding some sort of fee to the transaction. One reader has reported that E-Trade admitted overcharging him. But others at TD Ameritrade are also reporting issues.
I am posting this to give readers a chance to double-check broker transactions for this TIPS. What prices were you seeing on your transaction? Can anyone offer a logical explanation for our group for these discrepancies?
Anyway, have a wonderful holiday weekend.
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David Enna is a financial journalist, not a financial adviser. He is not selling or profiting from any investment discussed. The investments he discusses can be purchased through the Treasury or other providers without fees, commissions or carrying charges. Please do your own research before investing.