how to handle TIPS inflation factor and accrued interest

pamela77

I know it has been discussed before but I am wondering if anybody has a way to handle this. I am on a Mac, Sonoma 14.5, and using Schwab. Quicken has the current price per share downloaded correctly but the market value is all wrong and we have a lot of TIPS so it matters. Quickens market value is the current price on Schwab x the shares. It doesn't account for the inflation factor or the accrued interest. I have scoured the old posts and tried the suggestions but nothing works because when I update quicken it reverts to the downloaded information. Any help would be greatly appreciated.

Quicken Kristina

Hello @pamela77,

To assist with this question, would you please provide some screenshots from your Schwab account? Specifically, we'd need to see how this data, that is not in Quicken, is presented on the Schwab website. Please make sure to redact any personal or sensitive information from the screenshots, since this is a public forum. Also, we'd need to know the security type the you are using for your Treasury bonds. If needed, please refer to this Community FAQ for instructions on how to attach a screenshot. Alternatively, you can also drag and drop screenshots to your response if you are not given the option to add attachments.   

If you're not comfortable posting this information on a public forum, then you can send it to us by going to Help>Report a Problem and attaching the screenshots to the problem report. Please note that the maximum attachment limit is 10, so you may need to unselect some pre-selected items in order to send the screenshots.

I look forward to your response!

Chris_QPW

Can someone maybe one of the "investment experts" like @Jim_Harman @q_lurker enlighten me on how this is supposed to work (yes, I know that this is a Mac category and I'm calling on Quicken Windows SuperUsers, but sorry I'm not sure of which Quicken Mac SuperUsers know this and it is a general investment kind of question).

I don't see how Quicken can account for the "inflation factor". At least not in the "value" of the security.

As far as I know the "accrued interest" would just be a transaction where the interest "references" the security, so that it can be properly accounted for in the investment reports/portfolio return fields.

And as for the "inflation factor" that strikes me as something like predicting the future percentage of interest/dividend. And certainly, wouldn't be the "current value of the security". I would think that the current value of the security is what it can be sold for right now. Not what it can be sold for in a number years in the future.

q_lurker

I don't have any TIPS so I can't really offer anything. @Tom Young seems to be pretty knowledgeable. These two posts (one links to the other) seem to capture the issue well as far as I can tell:

https://community.quicken.com/discussion/7930760/tips-treasury-inflation-protected-securities-handling-the-inflation-factor

https://community.quicken.com/discussion/7923736/correct-accounting-for-tips-in-quicken-partial-solution-but-help-needed

Patient Zero

@pamela77 @Chris_QPW I have a fair number of individual TIPS in my Schwab account and have been wrestling with how to keep up a useful value for these positions in Quicken (Windows, although I don't imagine that matters).

When Schwab shows you TIPS available for purchase, it quotes an ask price which is the price-per-$100-par-value, as if this was a "normal" bond with no inflation adjustment. But over on the far right of the page it shows you what the total cost of the purchase (including accrued interest) will be, and that total >does< include the inflation adjustment. So in the example cited by @Ljacobsohn (quoted by @q_lurker above), Schwab would have shown an ask price of $100.091 (per $100 par value, indicating that the current market real yield at that moment was slightly below the bond's coupon). This ask price would have been multiplies by the number of bonds (1,000 in that example), giving a total ask price of $100,091.00; that figure would have then been multiplied by the accrued inflation factor (around 1.41, which Treasury Direct would show as 141.00) to give a total principal amount of $100,091 x 1.41 = about 141,128, with the accrued interest added to that inflation-adjusted total. That total cost would be what would have been shown over at the right and as the total cost in the trade window when you are asked to Submit the buy order.

But as @Ljacobsohn says, when you update the Schwab account in Quicken the next day, it will show a price of $100.091 (assuming no movement in the market), a market value for the 1,000-bond position of $100,091.00, and a loss of $141,128 - $100,091 = ($41,037). But this is incorrect. If @Chris_QPW wants to see a value that is what the security can be sold for right now, that's definitely not it; the current market value is something closer to $140,000 (after a hefty bid-ask spread).

I am not actually interested in what the security could be sold for right now, since I am going to hold the TIPS to maturity. So I have decided to just track what I think of as the "current maturity value;" the value the bond would return if it matured today, without any future inflation/deflation adjustment. That value is simply the par value ($100/bond, or $100,000 for the full position) times the current inflation factor of 1.41 or $141,000. That is >probably< an underestimate of what the bond will actually repay at maturity since over a period of years I think we will probably have positive net inflation.

So to accomplish this, I have been opening the price history of each TIPS bond, then going to Treasury Direct (https://www.treasurydirect.gov/auctions/announcements-data-results/tips-cpi-data/tips-cpi-history/) and clicking on my bond to open the page that shows the inflation factor ("Index Ratio") for every day. I delete every entry in the price history in Quicken >except< the prices for the last day of each calendar month (the date I've chosen to value my bonds), and enter any last-day-of-the-month prices I don't already have. Since this page is updated monthly, around the 12th of the month at the time the BLS releases the monthly CPI report, I don't need to do this more than monthly, and in practice I can do it every other month since the data in the table runs more than one month ahead (i.e., the tables will be updated on August 14 with the July inflation data, which will set the inflation factors for September, so at that time I can enter the Quicken Price History entries for 8/31 and 9/30, deleting everything except those two dates since 7/31). A little cumbersome, but it seems to work.

The thing that brought me to the Discussion pages today is the discovery that there is now a checkbox called "Ignore prices from broker download" on the Additional Security Information pop-up box under the Security Detail View. There is apparently no documentation on this, but I am hoping it will do what it seems to say, which is stop downloading the incorrect TIPS prices from Schwab, so that I can skip the step of deleting bad downloaded price history entries and just need to enter my chosen end-of-month prices.

Hope this all helps.

Chris_QPW

@Patient Zero Thank you for the very good explanation. I hope it really helps the people in this thread and Quicken Inc to understand what is needed. I personally don't have any TIPS so this was just so I had a better understanding of what the problem was.

For people reading this thread. I'm really sure that Quicken Mac doesn't have the "Ignore prices from broker download" feature (yet, hopefully if it proves useful in Quicken Windows they will put it in, in Quicken Mac).

Tom Young

@Patient Zero

Looking back through various "TIPS" posts in here, apparently Fidelity does download the correct current quote ("quote" x "factor")

https://community.quicken.com/discussion/7923736/correct-accounting-for-tips-in-quicken-partial-solution-but-help-needed

so one way of getting this to work is to move your TIPS to Fidelity. 😂 Fidelity supports the Direct Connect downloading method so, presumably, they've done programming on their end to get the correct factor adjusted quote into Quicken's quote field.

You might post an IDEA asking Quicken for a "factor" field that's available to the user when the quotes downloaded are "pre-factor" quotes. (Factors are used in a variety of securities, notably mortgage-backed bonds with a factor that declines as principal is paid off), and see if that gets any traction.

pamela77

@Patient Zero Thank you so much for this idea! You really seem to understand the issue! I also will just hold my tips to maturity so I don't care as much for market value, but I do want it to reflect the value at maturity as you say. Where do I go to delete the price history? If I go to the transaction and change the price there, quicken "fixes" it the next time I do a download. Where are you making the change so that it stays?

@Quicken Kristina I appreciate your help but am not comfortable putting up screenshots of my bank and quicken. I have called support many times about this and they referred it up the line but the answer I got back was to treat it like zero coupon bonds which doesn't work. Would you please take a look at patient zero's advice and see if it can work on quicken Mac, and help us to do it there?

THANK YOU. I would LOVE to finally get some workable way to deal with this. A lot of people have tips!

pamela77

@Patient Zero I found how to edit the price history. Can I also use this to create the correct cost basis? The cost basis at Schwab reflects the inflation factor, but quickens cost basis is just the price times the shares. If I change the cost per share in the transaction then the cash doesn't balance. Could I just go in the day after the purchase and change the price to reflect the adjusted price after the inflation factor? Right now the gain loss isn't right because quickens cost basis is artificially low.

Also, how to you enter the accrued interest? Right now its under misc and then accrued interest ( from bond buy), but I don't know if that applies it correctly. Under the security are you entering "other bond type" and are you entering the YTM?

Thank you SO much. I have been struggling with this for a few years!

pamela77

@Patient Zero I deleted all the price history and added the price that would have made the cost basis correct on the days I bought the tips but the cost basis remains stubborn at the cash out amount in the transaction history. How have you been dealing with that? And have you found how to apply the interest to the value of the bond?

Thank you!

pamela77

@Patient Zero and @Quicken Kristina,

Well now that quicken downloaded new prices for today all of my values have reverted to the old amounts. In the price history there is a new line reflecting august 19, and. so everything is back to the way it was. It looks as if I'd have to delete that every day. I do not see a way to make quicken Mac ""Ignore prices from broker download" as you described above. Does any body have an idea how to handle this?

q_lurker

I deleted all the price history and added the price that would have made the cost basis correct on the days I bought the tips but the cost basis remains stubborn at the cash out amount in the transaction history. How have you been dealing with that? And have you found how to apply the interest to the value of the bond?

The initial cost basis is determined by the transaction, not the price history. Whatever transaction you used to 'buy' the TIPS, defines that initial cost basis. After that, if the cost basis changes as interest is received, it may be necessary to adjust that initial cost basis with RtrnCap transactions )not sure about the MAC equivalent). Cost basis is never tied to price history.

pamela77

@q_lurker Thank you. It is helpful to know that the cost basis is derived from the transaction. Currently quicken shows the cost basis of the tips as the price x shares. It doesn't account for accrued interest OR the inflation factor. I just tried now changing my transactions showing interest to return of capital but it did not change the cost basis. Quicken MAC seems to just be using price per share times number of shares.

If I could get return of capital to somehow apply to that specific TIPS, there is still the issue of the inflation factor. Have you any idea of how to deal with that? Thank you for your help

Tom Young

Actually the principal amount of Treasury Inflation-Protected Securities (TIPS) does change as the inflation factor changes and assuming inflation you pay income tax on the increase each year. That affects your basis.

I don't know why Quicken Mac is changing the basis based on the downloaded (pre-factor) price; maybe some misunderstanding on the part of the programmers?

Probably the easiest thing to do here is to run TIPS manually with periodic manual entries as to correct "quote" and adjusted basis.

pamela77

Thank you Tom, I do understand that the principle amount of TIPS changes as the inflation factor changes but I don't think quicken understands it😏. It doesn't even take the inflation factor into account on the initial transaction.

I have always downloaded my accounts. I could do a manual account but we have TIPS in an IRA that has other investments that need to be downloaded. Do you know of a way to stop the download on just the TIPS? @Patient Zero said he saw a way to do it on windows but I couldn't figure it out on mac.

Tom Young

In the Windows version you can do Tools > Security List and there's a "Download quotes" column with check boxes to select what securities will receive quotes. There's other ways of getting to the Security List but ultimately it's that checkbox in the Download quotes column of the Security List that turns quotes for particular securities on or off.

I have no idea if Mac Quicken has a similar mechanism.

jacobs

@pamela77 @Tom Young In earlier versions of Quicken Mac (2015-2017), it was possible to select an individual security to not download prices...

The developers removed this at some point when they revamped the Securities window and added the checkbox allowing you the option to only download quotes for securities held…

I think they figured that people would want prices for securities they hold, and now they allowed turning of quotes for non-held securities with one checkmark.

But there's sort of a way… If you want to have this one security in your Schwab account not download prices, the trick would be to change the security symbol to something which doesn't exist. For instance…

Now, it can no longer download prices for this security.

But the problem I think you'll have is that then Schwab will download information for the real security symbol again, so you'll be double-counting the TIPS investment. But I would try it to see what happens.

Tom Young

@jacobs

Any thoughts on why downloaded quotes are apparently changing the cost basis of the TIPS? Does the Mac version have "TIPS" as some sort of security type or something, with some specific programming feature? Having the current quote change the cost basis just doesn't make sense.

jacobs

@Tom Young I'm afraid I have no knowledge of or about TIPS, in Quicken or otherwise; I've been learning from reading these threads. I agree that it seems implausible that the current quote is changing the cost basis — unless that cost basis is auto-calculated in a placeholder transaction perhaps? I can't imagine that Quicken Mac is actually changing a user-entered or downloaded cost basis. So my only guess is that there's some transaction of @pamela77's which either has no cost basis, or is a placeholder transaction which can change its value.

q_lurker

I really should not be extrapolating Q-Win behavior into a Q-Mac discussion. I know nothing about Q-Mac processes or behaviors. But I do sense that some subsequent comments went a bit off track.

You indicated an IRA account and asked about "a way to stop the download on just the TIPS? @Patient Zero said he saw a way to do it on windows but I couldn't figure it out on mac." Implied (to me) in your question was downloading information from the brokerage be it prices or transactions.

You got a variety of responses about not downloading quotes. The subsequent comments I noted were talking about downloading quotes from Quicken's third-party data supplier. None of the comments seemed pertinent to stopping the download of information from the brokerage for any specific security. To my knowledge, there is no way to do that in Q-Win. If @Patient Zero said something like that, i suspect something got misunderstood. I can't imagine Q-Mac has any such feature either. (Again, here I am extrapolating Q-Win processes onto Q-Mac.)

pamela77

Thank you ALL for looking at this problem. I'm grateful to have some experienced people working on this. There must be a lot of people who have tips and use Schwab and use quicken, so I can't be alone here. There are TWO big issues. The first and most important is the current value of the tips which is way off in quicken, thousands of dollars off. The current value of a tips on Schwab reflects the current price, the # of shares and an inflation factor and the accrued interest, as it should. But quicken shows the current value as simply the current price (downloaded from Schwab) x the number of shares - no inflation factor or accrued interest . If you go in and manually change the price, and delete all the price history from the security, it will change it but as soon as quicken does its next update it will go back to using the price x shares.

For cost basis Schwab shows the cost per share (which includes the inflation factor which CHANGES every day) x number of shares. Quicken shows the base price from the transaction with no inflation factor x number of shares. EVEN on the day you buy a tips the cost per share usually includes an inflation factor. You can go in and change the transaction, but again, quicken will over ride that on the next update. ALSO , even though there is a little window where you should put accrued interest, Quicken will not allow you to put it there. It shows the accrued interest as a separate line item, and even if you put the specific TIPS in the security/payee, the amount is not refected in portfolio view.

THANK YOU for looking at this issue. The best thing would be to find a way for quicken to download the right information and include the inflation factor and apply the accrued interest. The next idea is trying to find a work around and stop quicken from downloading and do it manually. We can t do the entire account manually because there are multiple investments .There has been some suggestion of trying to use return of capital, but I have not been able to get that to work.

ANY ideas would be appreciated!

Jerrold

I'm sorry if I'm off-topic, my path to here has been wandering. My TIPS update correctly in Quicken Windows, including the inflation factor, but most times they don't on the first try. I have found out, by accident, that if I then perform a Transaction Update only on my Fidelity account, that updates the Fidelity AND my Schwab TIPS positions correctly.

pamela77

Thank you. I'd like to try that . I am trying to figure out how to update just one account on Mac? Anybody know how to do that?.

Quicken Kristina

Hello @pamela77,

The closest you can get to updating just one account on Quicken for Mac is clicking on the account to select it, then going to Accounts>Update Selected Online Account.

From what I've seen, that command typically updates all accounts with that account's financial institution that are under the same login credentials as the account you want to update.

I hope this helps!

jacobs

@Quicken Kristina said: The closest you can get to updating just one account on Quicken for Mac is clicking on the account to select it, then going to Accounts>Update Selected Online Account. From what I've seen, that command typically updates all accounts with that account's financial institution that are under the same login credentials as the account you want to update.

Unless Quicken has recently implemented any changes, Update Selected Online Account behaves this way:

• If the account is a Direct Connect account, the update will download transactions for selected account plus any other Direct Connect accounts at that financial institution.
• If the account is a Quicken Connect account, the update will download transactions for all Quicken Connect accounts, irrespective of financial institution.
• There is no way to update just a single account (unless it is the only Direct Connect account at that financial institution, or unless it is the only Quicken Connect account in the data file).

pamela77

Thank you quicken Kristina, The reason I was trying to update one account was because @Jerrold said on sept 3 that IF he does a transaction update only on his fidelity account that it makes his TIPS in schwab download properly. This is all about figuring out how to handle TIPS so that they download correctly in quicken and take into account the inflation factor.