Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

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Robot Monster
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Re: Bonds in free fall

Post by Robot Monster »

watchnerd wrote: Fri Mar 26, 2021 1:42 pm
Scott S wrote: Fri Mar 26, 2021 1:32 pm They need more "suffering" to get down to my price. Fall, baby, fall! :moneybag
I'd like a 10 YR TIP that isn't negative.

And a unicorn pony.
There was a time when someone could have said, "I'd like a 10 YR TIP that doesn't yield 0%." Now 0% is a desirable yield.
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Re: Bonds in free fall

Post by watchnerd »

Robot Monster wrote: Fri Mar 26, 2021 2:05 pm
watchnerd wrote: Fri Mar 26, 2021 1:42 pm
Scott S wrote: Fri Mar 26, 2021 1:32 pm They need more "suffering" to get down to my price. Fall, baby, fall! :moneybag
I'd like a 10 YR TIP that isn't negative.

And a unicorn pony.
There was a time when someone could have said, "I'd like a 10 YR TIP that doesn't yield 0%." Now 0% is a desirable yield.
I was pricing out some 10 YR TIPS last night and the Vanguard bond calculator basically said:

"Give me $20K now and I'll give you back $15K (face value) 10 Years from now"

I know the calculator isn't very smart about how TIPS work, but man did it say something about the times we're in.
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FIREchief
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Re: Bonds in free fall

Post by FIREchief »

watchnerd wrote: Fri Mar 26, 2021 3:11 pm I was pricing out some 10 YR TIPS last night and the Vanguard bond calculator basically said:

"Give me $20K now and I'll give you back $15K (face value) 10 Years from now"

I know the calculator isn't very smart about how TIPS work, but man did it say something about the times we're in.
For $20,000 at today's price, you could buy $18,395 face value of the 9 year, 10 month TIPS (i.e. Jan 2031 maturity). This TIPS also pays a .125% annual coupon (about another $230). I'm not sure how VG comes up with $15K. They must have their web programmers working this one as well. :P
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
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Re: Bonds in free fall

Post by watchnerd »

FIREchief wrote: Fri Mar 26, 2021 4:24 pm

For $20,000 at today's price, you could buy $18,395 face value of the 9 year, 10 month TIPS (i.e. Jan 2031 maturity). This TIPS also pays a .125% annual coupon (about another $230). I'm not sure how VG comes up with $15K. They must have their web programmers working this one as well. :P
I know, right?

I looked at what the calculator spit out and thought of submitting a support ticket, but realized I don't want to have to explain TIPS calculations to a web developer.
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Beensabu
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Re: Bonds in free fall

Post by Beensabu »

Free fall stopped. It's up to you whether you want to put your cash back and avoid the liquidity trap for everyone. Thank you in advance.
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Re: Bonds in free fall

Post by SuperXmas »

anon_investor wrote: Tue Feb 16, 2021 5:34 pm The fact that the 30 year treasury yield is 2.08% today, the highest it has been since 2/12/2020 (2.09%), is crazy.

One year later it is as if nothing happened...
No doubt. That’s the entire market though. Might have something to do with the 7tr of fiscal and monetary stimulus.
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Re: Bonds in free fall

Post by 000 »

Beensabu wrote: Tue Apr 13, 2021 7:14 pm Free fall stopped. It's up to you whether you want to put your cash back and avoid the liquidity trap for everyone. Thank you in advance.
You're probably right for now. No need to thank me. I haven't taken any action - still breathing on the embers of my bond holdings.
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Beensabu
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Re: Bonds in free fall

Post by Beensabu »

000 wrote: Tue Apr 13, 2021 7:28 pm
Beensabu wrote: Tue Apr 13, 2021 7:14 pm Free fall stopped. It's up to you whether you want to put your cash back and avoid the liquidity trap for everyone. Thank you in advance.
You're probably right for now. No need to thank me. I haven't taken any action - still breathing on the embers of my bond holdings.
Embers can ignite small stuff. Then you have flame. Then you put bigger stuff on there. Then you can have a fire.

Personally, I think the embers are the best most fascinating part.
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Re: Bonds in free fall

Post by Scott S »

Speaking of "falling", real yields on the 30-year just fell back into negative territory. :(
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Re: Bonds in free fall

Post by rockstar »

At the current yields, how many years to breakeven after the losses since the beginning of the year?
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Re: Bonds in free fall

Post by watchnerd »

Scott S wrote: Mon Apr 26, 2021 7:39 pm Speaking of "falling", real yields on the 30-year just fell back into negative territory. :(
Were you buying 30 YRs?
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Re: Bonds in free fall

Post by watchnerd »

rockstar wrote: Mon Apr 26, 2021 8:21 pm At the current yields, how many years to breakeven after the losses since the beginning of the year?

How can I answer that without knowing the duration?
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Scott S
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Re: Bonds in free fall

Post by Scott S »

watchnerd wrote: Mon Apr 26, 2021 8:43 pm
Scott S wrote: Mon Apr 26, 2021 7:39 pmSpeaking of "falling", real yields on the 30-year just fell back into negative territory. :(
Were you buying 30 YRs?
Nah, just keeping an eye on the prices... ;)
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Re: Bonds in free fall

Post by rockstar »

watchnerd wrote: Mon Apr 26, 2021 8:45 pm
rockstar wrote: Mon Apr 26, 2021 8:21 pm At the current yields, how many years to breakeven after the losses since the beginning of the year?

How can I answer that without knowing the duration?
BND or TLT.
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watchnerd
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Re: Bonds in free fall

Post by watchnerd »

rockstar wrote: Tue Apr 27, 2021 7:15 pm
watchnerd wrote: Mon Apr 26, 2021 8:45 pm
rockstar wrote: Mon Apr 26, 2021 8:21 pm At the current yields, how many years to breakeven after the losses since the beginning of the year?

How can I answer that without knowing the duration?
BND or TLT.
You should be able to compute that pretty easily.

(assuming no further changes in interest rates)
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Re: Bonds in free fall

Post by Forester »

Commercials most relatively bullish vs small speculators in the long bond, since late Jan 2020 before the Covid crash;

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Re: Bonds in free fall

Post by NoRegret »

NoRegret wrote: Tue Mar 16, 2021 7:25 pm
NoRegret wrote: Fri Mar 12, 2021 7:02 pm Now that the 10-yr took out recent highs a quick run up to 1.9-2% is in play. I fully expect the Treasury to spend down the TGA and slow down bond issuance to wait out "transitory" inflation. That will be an opportunity for real rates to fall.
Quick FYI, now that everybody (including Bill Gross) is talking about 3-4% inflation, TLT is seriously oversold and showing a rare divergence with money flow index (MFI).
https://schrts.co/kiehxwrE
Picked up some TMF as a short term trade while still thinking TIPs will act better than nominal bonds. YMMV.
Taking profit on 1/3 of my TMF position here. Looking back my two entries were a day or two either side of the March bottom. We’ll see if long bonds have enough technical strength to run further. TIP/SCHP are now positive for the year.

There has been pronounced negative serial daily correlation (up day, down day) in almost every market, at some point strong trends should emerge.
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Re: Bonds in free fall

Post by 000 »

NoRegret wrote: Fri May 07, 2021 1:57 am Taking profit on 1/3 of my TMF position here. Looking back my two entries were a day or two either side of the March bottom. We’ll see if long bonds have enough technical strength to run further. TIP/SCHP are now positive for the year.

There has been pronounced negative serial daily correlation (up day, down day) in almost every market, at some point strong trends should emerge.
Nice. Still in the rest of your TMF?
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Re: Bonds in free fall

Post by NoRegret »

000 wrote: Thu May 20, 2021 6:58 pm
NoRegret wrote: Fri May 07, 2021 1:57 am Taking profit on 1/3 of my TMF position here. Looking back my two entries were a day or two either side of the March bottom. We’ll see if long bonds have enough technical strength to run further. TIP/SCHP are now positive for the year.

There has been pronounced negative serial daily correlation (up day, down day) in almost every market, at some point strong trends should emerge.
Nice. Still in the rest of your TMF?
Yes, May 6 turned out to be a local top (in bond price) before the big NFP miss and a small correction. My price objective when entering this trade was just below $26 so bond price needs to make a run from here.

This is a tiny part of my portfolio that I really shouldn’t be spending much time on. Far more critical is whether there will be a rotation out of commodities/value and into FANG and an index melt-up.
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Re: Bonds in free fall

Post by 000 »

Thanks.
NoRegret wrote: Thu May 20, 2021 7:16 pm Far more critical is whether there will be a rotation out of commodities/value and into FANG and an index melt-up.
Which side of that trade are you on? I'm on commodities/value for the next 5-10 years.
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Re: Bonds in free fall

Post by rockstar »

Saw an article over at Bloomberg that said that the long bond is now positively correlated to equities. That's not good news.
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Re: Bonds in free fall

Post by NoRegret »

000 wrote: Thu May 20, 2021 7:21 pm Thanks.
NoRegret wrote: Thu May 20, 2021 7:16 pm Far more critical is whether there will be a rotation out of commodities/value and into FANG and an index melt-up.
Which side of that trade are you on? I'm on commodities/value for the next 5-10 years.
Agree with that view for the next 5-10 years, but nothing moves in a straight line. If Grantham’s epic bubble comes to fruition it’d be a tragedy to sit out.
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Re: Bonds in free fall

Post by NoRegret »

rockstar wrote: Thu May 20, 2021 9:25 pm Saw an article over at Bloomberg that said that the long bond is now positively correlated to equities. That's not good news.
viewtopic.php?p=5829028#p5829028
:D
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Re: Bonds in free fall

Post by calcada »

Say my target allocation is 60/40 VT/BNDW.

Say I am currently 60/40 VT/CASH and do not own any bonds.

In this environment with bond yields at historic lows and bond prices at very high levels, does it still make sense for me to start buying bonds if I own no bonds right now?

Is there any upside to bonds in the next 10 years?

Is there any benefit left in buying bonds now? There seems to be no upside to bonds in the future (with the current yields) and they may be even positively correlated with stocks now so there may no longer even be any diversification benefit.

If I am 40% CASH should I still start buying BNDW now or stay CASH for reasons above? What would you do and why?
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Re: Bonds in free fall

Post by Marseille07 »

calcada wrote: Fri May 21, 2021 12:12 am Say my target allocation is 60/40 VT/BNDW.

Say I am currently 60/40 VT/CASH and do not own any bonds.

In this environment with bond yields at historic lows and bond prices at very high levels, does it still make sense for me to start buying bonds if I own no bonds right now?

Is there any upside to bonds in the next 10 years?

Is there any benefit left in buying bonds now? There seems to be no upside to bonds in the future (with the current yields) and they may be even positively correlated with stocks now so there may no longer even be any diversification benefit.

If I am 40% CASH should I still start buying BNDW now or stay CASH for reasons above? What would you do and why?
If your target is really 60/40 VT/BNDW then you should move toward that target, it's simple as that.

But before doing so, you should reconsider if that target makes sense, as you seem to have a lot of hesitation. Your target AA has to be something you feel comfortable sticking with, regardless of market conditions.
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Re: Bonds in free fall

Post by calcada »

Marseille07 wrote: Fri May 21, 2021 12:20 am If your target is really 60/40 VT/BNDW then you should move toward that target, it's simple as that.

But before doing so, you should reconsider if that target makes sense, as you seem to have a lot of hesitation. Your target AA has to be something you feel comfortable sticking with, regardless of market conditions.
I am comfortable with my target AA of 60% stocks. I am hesitating on what to do with the 40% cash and whether I should put it in bonds. I struggle to see any upside and benefit to bonds in the future.
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Re: Bonds in free fall

Post by NiceUnparticularMan »

calcada wrote: Fri May 21, 2021 12:27 am
Marseille07 wrote: Fri May 21, 2021 12:20 am If your target is really 60/40 VT/BNDW then you should move toward that target, it's simple as that.

But before doing so, you should reconsider if that target makes sense, as you seem to have a lot of hesitation. Your target AA has to be something you feel comfortable sticking with, regardless of market conditions.
I am comfortable with my target AA of 60% stocks. I am hesitating on what to do with the 40% cash and whether I should put it in bonds. I struggle to see any upside and benefit to bonds in the future.
I think the disconnect is a 60:40 VT:BNDW portfolio has a higher longer-term expected return than a 60:40 VT:cash portfolio--and also different expected risk characteristics.

So if you liked the expected return/risk characteristics of the 60:40 VT:BNDW portfolio, you are not getting that with your current portfolio.

Now, if you no longer like the expected risk characteristics of a 60:40 VT:BNDW portfolio and would prefer to use cash, you could restore a similar expected return by increasing the VT percentage. I haven't bothered to do the math, but maybe something like a 70:30 VT:cash portfolio.

However, if you insist on keeping your VT at 60% while not carrying out your plan to hold the remaining 40% in BNDW, you are violating your original plan's long-term expected return goal due to concerns about short-term risk.

And as a general rule, that sort of thinking is very dangerous. Not to go off on a tangent, but I would classify that as a likely example of what is know in the academic literature as myopic loss aversion, and MLA has been shown to be very harmful to investors, in just this way--it leads to people taking less short-term risk for long-term expected returns than would be optimal for them in the long run.
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Re: Bonds in free fall

Post by 000 »

NoRegret wrote: Thu May 20, 2021 9:30 pm If Grantham’s epic bubble comes to fruition it’d be a tragedy to sit out.
Yep. The timing of these things is always tricky though. But I know that you'll have no regret. :wink:
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Re: Bonds in free fall

Post by DB2 »

calcada wrote: Fri May 21, 2021 12:12 am
Is there any upside to bonds in the next 10 years?

The only upside is, bonds should still be worth more than cash at zero percent interest in a typical money market acct. If inflation ends up being worse than expected, I'm not as sure.
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Re: Bonds in free fall

Post by SafeBonds »

The solution to historically low bond yields is to save more and work longer. Do not skimp on safe bonds!
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Re: Bonds in free fall

Post by 000 »

SafeBonds wrote: Sat May 22, 2021 6:09 pm The solution to historically low bond yields is to save more and work longer. Do not skimp on safe bonds!
Welcome to the forum.

Personally, I don't want to work longer to save more in a vehicle unshielded from inflation.
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Re: Bonds in free fall

Post by gurusw »

I have 1.7M portfolio. My goal is to keep 100K cash for emergency, and from the rest, invest 75% in stocks & 25% in bonds.

At present, my cash reserves are at 180K, and the bonds are 80K less than their target value. Should I transfer my extra 80K cash to bonds, or let it be?
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Re: Bonds in free fall

Post by SafeBonds »

000 wrote: Sat May 22, 2021 7:51 pm
SafeBonds wrote: Sat May 22, 2021 6:09 pm The solution to historically low bond yields is to save more and work longer. Do not skimp on safe bonds!
Welcome to the forum.

Personally, I don't want to work longer to save more in a vehicle unshielded from inflation.
Thank you. TIPS and I Bonds are safe bonds too! But anyway, one has to look at the whole portfolio, not just one piece in isolation. Sure if you look at the expected real return of safe nominal bonds they do not look attractive. But I am worried people are ditching them to add more risk assets and end up taking more risk than they should! For example, some people replace safe bonds with "blue chip" dividend paying stocks or junk or emerging market bonds to reach for yield without realizing the risk they are taking. A Boglehead might ditch his safe bonds for more total stock market index fund. Yields are historically low but stock valuations are historically high. Don't ditch the safe bonds and look at your portfolio as a whole, not just 1 piece in isolation!
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Re: Bonds in free fall

Post by willthrill81 »

000 wrote: Sat May 22, 2021 7:51 pmPersonally, I don't want to work longer to save more in a vehicle unshielded from inflation.
Especially when vehicles that are explicitly shielded from inflation are readily available.
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Re: Bonds in free fall

Post by 000 »

SafeBonds wrote: Sat May 22, 2021 9:33 pm Thank you. TIPS and I Bonds are safe bonds too! But anyway, one has to look at the whole portfolio, not just one piece in isolation. Sure if you look at the expected real return of safe nominal bonds they do not look attractive. But I am worried people are ditching them to add more risk assets and end up taking more risk than they should! For example, some people replace safe bonds with "blue chip" dividend paying stocks or junk or emerging market bonds to reach for yield without realizing the risk they are taking. A Boglehead might ditch his safe bonds for more total stock market index fund. Yields are historically low but stock valuations are historically high. Don't ditch the safe bonds and look at your portfolio as a whole, not just 1 piece in isolation!
I mostly agree.

The flip side though is to consider how much one is paying for the safety - too much safety is another kind of risk. Many participants in the bond market either have to buy bonds or are buying them to match nominal liabilities, so the bond market may thus not be attractively pricing bonds for an individual investor.
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Re: Bonds in free fall

Post by 000 »

gurusw wrote: Sat May 22, 2021 8:51 pm I have 1.7M portfolio. My goal is to keep 100K cash for emergency, and from the rest, invest 75% in stocks & 25% in bonds.

At present, my cash reserves are at 180K, and the bonds are 80K less than their target value. Should I transfer my extra 80K cash to bonds, or let it be?
I think you should decide if you want to be a market timer or not. If not, there is no reason to wait to get to the desired ultimate portfolio. Personally I am market timing right now and keeping cash instead of buying more bonds.
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Re: Bonds in free fall

Post by gurusw »

000 wrote: Sun May 23, 2021 3:50 pm I think you should decide if you want to be a market timer or not. If not, there is no reason to wait to get to the desired ultimate portfolio. Personally I am market timing right now and keeping cash instead of buying more bonds.
What are you planning to do with that cash? Buy bonds later, or buy stocks if they go down?
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Re: Bonds in free fall

Post by 000 »

gurusw wrote: Sun May 23, 2021 4:27 pm What are you planning to do with that cash? Buy bonds later, or buy stocks if they go down?
Buy whatever looks most attractive whenever there are attractive enough investments to justify a smaller cash allocation. Probably stocks.

I don't see myself buying bonds again until Treasuries are yielding double digits.
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Re: Bonds in free fall

Post by Stinky »

000 wrote: Sun May 23, 2021 4:55 pm
gurusw wrote: Sun May 23, 2021 4:27 pm What are you planning to do with that cash? Buy bonds later, or buy stocks if they go down?
Buy whatever looks most attractive whenever there are attractive enough investments to justify a smaller cash allocation. Probably stocks.

I don't see myself buying bonds again until Treasuries are yielding double digits.
When was the last time that Treasuries yielded double digits? Was that in the early 1980s?
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Re: Bonds in free fall

Post by 000 »

Stinky wrote: Sun May 23, 2021 5:02 pm When was the last time that Treasuries yielded double digits? Was that in the early 1980s?
Yep.

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Re: Bonds in free fall

Post by willthrill81 »

000 wrote: Sun May 23, 2021 4:55 pm
gurusw wrote: Sun May 23, 2021 4:27 pm What are you planning to do with that cash? Buy bonds later, or buy stocks if they go down?
Buy whatever looks most attractive whenever there are attractive enough investments to justify a smaller cash allocation. Probably stocks.

I don't see myself buying bonds again until Treasuries are yielding double digits.
If I could buy TIPS yielding at least 3% real, I'd definitely buy some. But that's far in the rearview mirror, and I don't see such yields on the forward horizon either.
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Re: Bonds in free fall

Post by 000 »

willthrill81 wrote: Sun May 23, 2021 6:34 pm If I could buy TIPS yielding at least 3% real, I'd definitely buy some. But that's far in the rearview mirror, and I don't see such yields on the forward horizon either.
It's certainly possible but I am trying to move towards bond-indifferent investing. Stocks and bonds seem to me like the same trade (obviously the magnitudes are different) as long as we're in the "declining rates" paradigm.
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Re: Bonds in free fall

Post by NoRegret »

NoRegret wrote: Thu May 20, 2021 7:16 pm Far more critical is whether there will be a rotation out of commodities/value and into FANG and an index melt-up.
I'm watching if today will turn out to be the start of the melt-up phase in everything.

Large tech is leading, bonds up, commodities turning up too. I expect emergent tech, small and value to take a backseat. PMs are up for the day too but their short term cycle is mature. Bond yields should come down with the "inflation will be transitory" narrative to support stocks.

The melt-up is far from a given: put-call ratio and sentiment are supportive, but breadth in Naz has been concerning since the start of the year.
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Re: Bonds in free fall

Post by NoRegret »

NoRegret wrote: Thu May 20, 2021 7:16 pm
000 wrote: Thu May 20, 2021 6:58 pm
NoRegret wrote: Fri May 07, 2021 1:57 am Taking profit on 1/3 of my TMF position here. Looking back my two entries were a day or two either side of the March bottom. We’ll see if long bonds have enough technical strength to run further. TIP/SCHP are now positive for the year.

There has been pronounced negative serial daily correlation (up day, down day) in almost every market, at some point strong trends should emerge.
Nice. Still in the rest of your TMF?
Yes, May 6 turned out to be a local top (in bond price) before the big NFP miss and a small correction. My price objective when entering this trade was just below $26 so bond price needs to make a run from here.

This is a tiny part of my portfolio that I really shouldn’t be spending much time on. Far more critical is whether there will be a rotation out of commodities/value and into FANG and an index melt-up.
My sell order for another 1/3 of TMF below $26 just went thru, but overall I'm not too impressed with how long bonds are off-setting stocks recently. Just further confirmation that when rates are low, despite convexity, bonds are losing their hedging power. That said, I'm holding my final 1/3 of TMF just for a while longer in case stocks decline further next week. Even the most minute acknowledgement from the Fed on inflation seems to be taken as a positive.

The rotation from commodities to tech seems to be starting.
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Re: Bonds in free fall

Post by NoRegret »

NoRegret wrote: Thu Jun 17, 2021 10:47 am My sell order for another 1/3 of TMF below $26 just went thru, but overall I'm not too impressed with how long bonds are off-setting stocks recently. Just further confirmation that when rates are low, despite convexity, bonds are losing their hedging power. That said, I'm holding my final 1/3 of TMF just for a while longer in case stocks decline further next week. Even the most minute acknowledgement from the Fed on inflation seems to be taken as a positive.

The rotation from commodities to tech seems to be starting.
So there was a gap in the 10-yr rate ($TNX) around 1.2%, corresponding to $149 on TLT and $29 on TMF that I had been eyeing, but I ended up exiting the rest of my TMF anyway. It was intended as a hedge to IVOL and served that purpose very well. Currently, I have no view on where rates will be near term so the default response is to reduce volatility exposure.

Over the next several years, I still lean towards inflation while fully acknowledging some of the current high readings are due to supply constrains and base effects. I also sympathize with the view that debt is fundamentally deflationary and QE ended up clogging the financial system and not getting into the real economy. However on balance, I still give the nod to fiscal stimulus and cost-push inflation. That means I see gradual inflation, albeit with ROC slowing down in the coming quarters, and requiring continued fiscal policy to sustain that view.
Market timer targeting long term cycles -- aiming for several key decisions per asset class per decade
NoRegret
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Re: Bonds in free fall

Post by NoRegret »

NoRegret wrote: Tue Jun 22, 2021 8:30 pm So there was a gap in the 10-yr rate ($TNX) around 1.2%, corresponding to $149 on TLT and $29 on TMF ...
Fed minutes day. This was the proverbial 2nd shoe to drop. Today's low in 10y rate was 1.296% -- first time below 1.3% since mid February. The high in TLT was $148.56 and in TMF $28.96.

The inflation narrative has gone a full circle from "omg it's finally here" to "it's transitory". Most of the bond price movements lately have more to do with positioning than the market trying to price interest rates. The danger now leans toward headline surprises to the upside and for longer. It wouldn't surprise me to have another run towards 2%.

Took a stab at TBF today.
Market timer targeting long term cycles -- aiming for several key decisions per asset class per decade
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Re: Bonds in free fall

Post by Broken Man 1999 »

For this moment in time, my Long-term Treasury (VLGSX) and my Extended Duration Treasuries (EDV) are both outpacing my equity funds in percentage of increase in price for this session.

Lots of green today, my favorite color. My only red holding is down a whopping $100 total on 1000 shares.

I'm going outside to smoke a good cigar and see what kind of yard cleanup DW and a grandson have done. There was some small branches and tree debris to clean up.

We were lucky that Elsa just gave us some high winds and some rain. First dodge of a hurricane this year. We are up 1-0.

Unless there is a swoon in the next 10 minutes or so, we might have another ATH.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go." - Mark Twain
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Re: Bonds in free fall

Post by Parkinglotracer »

Bonds are coming back these last few months - lol
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Re: Bonds in free fall

Post by Broken Man 1999 »

Bond holdings are my only holdings in green today.

I'll take more of this "free fall."

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go." - Mark Twain
NoRegret
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Re: Bonds in free fall

Post by NoRegret »

NoRegret wrote: Wed Jul 07, 2021 2:23 pm
NoRegret wrote: Tue Jun 22, 2021 8:30 pm So there was a gap in the 10-yr rate ($TNX) around 1.2%, corresponding to $149 on TLT and $29 on TMF ...
Fed minutes day. This was the proverbial 2nd shoe to drop. Today's low in 10y rate was 1.296% -- first time below 1.3% since mid February. The high in TLT was $148.56 and in TMF $28.96.

The inflation narrative has gone a full circle from "omg it's finally here" to "it's transitory". Most of the bond price movements lately have more to do with positioning than the market trying to price interest rates. The danger now leans toward headline surprises to the upside and for longer. It wouldn't surprise me to have another run towards 2%.

Took a stab at TBF today.
Bond yields have been pretty wild since my last post, 10-yr got as low as 1.13% and closed at 1.34% today. We've also had the obligatory hedge fund blow-up shorting bonds story.

"Transitory" is now defined as "not persistent". The July CPI reading is tomorrow, I won't be surprised if it surprises on the upside. Even if the inflation rate-of-change slows down, the absolute level can remain high since labor costs are sticky and owner's equivalent rent will likely start to pick up.

I'm expecting the 10-yr to make a run at 2% or above from here. Stocks, esp large growth probably will be able to shake it off until about the previous high of 1.75%.

TBF is the 1x inverse of TLT so there was little decay (showing a small gain as a matter of fact). I'm just about ready to switch to the 2x inverse, TBT.

Edit: TBT is -2x, TMV is -3x
Last edited by NoRegret on Wed Aug 11, 2021 8:40 am, edited 1 time in total.
Market timer targeting long term cycles -- aiming for several key decisions per asset class per decade
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