Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
Edit May 03, 2022: Changed title from "Bonds in free fall" to "Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!" as suggested here.
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Is this the real thing or do bonds have another rally left in them?
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Is this the real thing or do bonds have another rally left in them?
Last edited by 000 on Tue May 03, 2022 4:11 pm, edited 1 time in total.
Re: Bonds in free fall
I take this as LTT reloading so that they can be ready for another stock downfall.
Re: Bonds in free fall
The few who know aren't telling. The rest of us lambs are headed you know where. For the folks who were so hot to ditch munis for treasuries today VTEB was -0.20% while VGLT was -1.38%. As smart as you think you are Mr. Market will always be smarter.
Last edited by midareff on Tue Feb 16, 2021 5:33 pm, edited 1 time in total.
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Re: Bonds in free fall
I regret having had LTTs, just took a loss. Tax-loss harvesting at work.
- anon_investor
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Re: Bonds in free fall
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...
One year later it is as if nothing happened...
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Re: Bonds in free fall
I'm devastated. Feeling like I loaded up 2 years worth of emergency food and they went bad before having any. I didn't expect to lose sleep over bonds crashing.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...
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Re: Bonds in free fall
The current situation with bonds is an interesting case study on boglehead principals. Do you adjust strategy based on rock bottom yields and increasing inflation expectations or stay the course with current allocation?
I am not a market timer. But I also have no interest in owning bonds at yields that effectively guarantee a negative real return.
I am not a market timer. But I also have no interest in owning bonds at yields that effectively guarantee a negative real return.
- anon_investor
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Re: Bonds in free fall
I completely dumped all my LTT (some for a small loss) before Summer 2020 and bought equities. Instead of reloading LTT in 2020, I bought I Bonds. As LTT yield keeps going up they start looking more attractive...Marseille07 wrote: ↑Tue Feb 16, 2021 5:37 pmI'm devastated. Feeling like I loaded up 2 years worth of emergency food and they went bad before having any. I didn't expect to lose sleep over bonds crashing.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...
- anon_investor
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Re: Bonds in free fall
I agree, I have been buying I Bonds instead, but if LTT yields keep increasing, they their real yield might become positive again.SouthernFIRE wrote: ↑Tue Feb 16, 2021 5:41 pm The current situation with bonds is an interesting case study on boglehead principals. Do you adjust strategy based on rock bottom yields and increasing inflation expectations or stay the course with current allocation?
I am not a market timer. But I also have no interest in owning bonds at yields that effectively guarantee a negative real return.
- arcticpineapplecorp.
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Re: Bonds in free fall
bonds are for stability, not money making (that is what stocks are for). Using the time period you did (May 2020-present) this is the difference between total bond market index fund and EDV (I know they're not the same, but the point is long term bonds (or treasuries) are more risky than short/intermediate, which is what the chart shows):
source:
http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D
some people like long term bonds. perhaps that was only when rates fell.
stocks help you eat well. bonds (the right duration) help you sleep well.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions |
Re: Bonds in free fall
Good grief. You would expect the standard deviation of annual returns of EDV to be maybe 20%. That's like the volatility of the total stock index. So gaining or losing 20% or so in a year is not free fall but natural to the beast. The one year return has been +24%. Getting a 20% downturn along the way would be routine.
Behavior like this might be good for adding in with a high stock portfolio because the return is high and the volatility is high and the correlation to stocks might even be negative, so you get diversification benefit in a high risk, high return portfolio.
Holding EDV because someone wanted a bond fund would probably be a mistake.
Behavior like this might be good for adding in with a high stock portfolio because the return is high and the volatility is high and the correlation to stocks might even be negative, so you get diversification benefit in a high risk, high return portfolio.
Holding EDV because someone wanted a bond fund would probably be a mistake.
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Re: Bonds in free fall
As a long term investor, I prefer this rather than TLT going to 200. Do the reverse of last March,sell stocks and rebalance per the IPS. The volatility of the asset is one of the main reasons I own these bonds.
Re: Bonds in free fall
BHs think long term. Maybe you should extend the chart to 5-10 years.
Market timer targeting long term cycles -- aiming for several key decisions per asset class per decade
Re: Bonds in free fall
OP,
Please change the title of your topic to LTT bonds in free fall. VBTLX is doing fine.
KlangFool
Please change the title of your topic to LTT bonds in free fall. VBTLX is doing fine.
KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
Re: Bonds in free fall
Market timer targeting long term cycles -- aiming for several key decisions per asset class per decade
Re: Bonds in free fall
Thanks, I appreciate that, but after studying IVOL I'm not confident I understand it well enough to invest.
- anon_investor
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Re: Bonds in free fall
Re: Bonds in free fall
Reinvest dividends, wait a period longer than the duration and you're better off for the "free fall". This is a good thing about bonds. Higher rates (lower prices) is good news, not bad.
It's only a problem if you can't wait longer than the duration, but you shouldn't be in bonds whose duration is longer than your horizon.
It's only a problem if you can't wait longer than the duration, but you shouldn't be in bonds whose duration is longer than your horizon.
Re: Bonds in free fall
Also interesting is the fact that junk bond yields aren't moving even though LTT yields are. Vanguard High-Yield Corporate is flat today and Long Term Corporate funds are moving less than Long Term Treasury. Could be a sign that a rush from safety is beginning.
Re: Bonds in free fall
Correct only if you are matching a nominal liability in the future.Seasonal wrote: ↑Tue Feb 16, 2021 6:35 pm Reinvest dividends, wait a period longer than the duration and you're better off for the "free fall". This is a good thing about bonds. Higher rates (lower prices) is good news, not bad.
It's only a problem if you can't wait longer than the duration, but you shouldn't be in bonds whose duration is longer than your horizon.
My allocation to bonds is around 5% so I'm more interested in this from a technical angle.
- whodidntante
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Re: Bonds in free fall
If LTTs get cut in half maybe I'll buy some.
Re: Bonds in free fall
Whether or not you are matching a nominal liability, if you wait a period equal to the duration after a price decrease = rate increase, you will be better off in nominal terms if holding nominal bonds and will be better off in real terms if holding real bonds, such as TIPS. This assumes no other rate change but, if so, repeat.000 wrote: ↑Tue Feb 16, 2021 6:40 pmCorrect only if you are matching a nominal liability in the future.Seasonal wrote: ↑Tue Feb 16, 2021 6:35 pm Reinvest dividends, wait a period longer than the duration and you're better off for the "free fall". This is a good thing about bonds. Higher rates (lower prices) is good news, not bad.
It's only a problem if you can't wait longer than the duration, but you shouldn't be in bonds whose duration is longer than your horizon.
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Re: Bonds in free fall
My TMF is getting clobbered
Re: Bonds in free fall
Is it a good time to buy them?
I'm still 100% stock (I'm in my 30s), but I just sold about 25% of my portfolio to start building a house later this year. Probably a bit earlier than I could, but I'm slightly worried about another crash right before I need the money.
Now I'm sitting on a pile of cash and wondering if I should park some into bonds for 6-8 months or is it a bad idea to do short-term.
I'm still 100% stock (I'm in my 30s), but I just sold about 25% of my portfolio to start building a house later this year. Probably a bit earlier than I could, but I'm slightly worried about another crash right before I need the money.
Now I'm sitting on a pile of cash and wondering if I should park some into bonds for 6-8 months or is it a bad idea to do short-term.
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Re: Bonds in free fall
I would leave it right where it is if you need the money in 6-8 months.Pudu wrote: ↑Tue Feb 16, 2021 6:51 pm Is it a good time to buy them?
I'm still 100% stock (I'm in my 30s), but I just sold about 25% of my portfolio to start building a house later this year. Probably a bit earlier than I could, but I'm slightly worried about another crash right before I need the money.
Now I'm sitting on a pile of cash and wondering if I should park some into bonds for 6-8 months or is it a bad idea to do short-term.
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Re: Bonds in free fall
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Re: Bonds in free fall
Put it into no high yield savings, you will get 0.5%.Pudu wrote: ↑Tue Feb 16, 2021 6:51 pm Is it a good time to buy them?
I'm still 100% stock (I'm in my 30s), but I just sold about 25% of my portfolio to start building a house later this year. Probably a bit earlier than I could, but I'm slightly worried about another crash right before I need the money.
Now I'm sitting on a pile of cash and wondering if I should park some into bonds for 6-8 months or is it a bad idea to do short-term.
- anon_investor
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Re: Bonds in free fall
For 6-8 months you should not be buying any bonds, especially not long term treasury bonds.Pudu wrote: ↑Tue Feb 16, 2021 6:51 pm Is it a good time to buy them?
I'm still 100% stock (I'm in my 30s), but I just sold about 25% of my portfolio to start building a house later this year. Probably a bit earlier than I could, but I'm slightly worried about another crash right before I need the money.
Now I'm sitting on a pile of cash and wondering if I should park some into bonds for 6-8 months or is it a bad idea to do short-term.
Re: Bonds in free fall
It's already down -1.74% YTD. For this type of fund in such a short period of time it seems high.
Last edited by DB2 on Tue Feb 16, 2021 7:00 pm, edited 1 time in total.
Re: Bonds in free fall
Triple digit golfer wrote: ↑Tue Feb 16, 2021 6:52 pm I would leave it right where it is if you need the money in 6-8 months.
anon_investor wrote: ↑Tue Feb 16, 2021 6:55 pm For 6-8 months you should not be buying any bonds, especially not long term treasury bonds.
Roger that, thanks for the advice!
Re: Bonds in free fall
When it is -30%, you can this as free fall. Anything less than -10% is not a big deal.
KlangFool
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Re: Bonds in free fall
I find it alarming. Already ran to the hills!
I'm learning that holding a hedge carries its own set of challenges. My risk tolerance is a lot shallower because of devastation that it's collapsing as equities are soaring.
I'm learning that holding a hedge carries its own set of challenges. My risk tolerance is a lot shallower because of devastation that it's collapsing as equities are soaring.
Last edited by Marseille07 on Tue Feb 16, 2021 7:18 pm, edited 1 time in total.
Re: Bonds in free fall
And, why is that a big deal?
It is not.
KlangFool
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Re: Bonds in free fall
Isn't that the point? Negative correlations and all. Why didn't you rebalance?Marseille07 wrote: ↑Tue Feb 16, 2021 7:14 pm I find it alarming. Already ran to the hills!
I'm learning that holding a hedge carries its own set of challenges. My risk tolerance is a lot shallower because of devastation that it's collapsing as equities are soaring.
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Re: Bonds in free fall
Has Hell frozen over? I agree with you!
Re: Bonds in free fall
Losing 0.44% in a single day and 1.74% YTD on a fund with an annual yield of 1.10% seems like a bad risk-reward tradeoff to me.
Meanwhile, cash in a HYSA is yielding 0.50% with no principal risk.
Meanwhile, cash in a HYSA is yielding 0.50% with no principal risk.
Re: Bonds in free fall
It's a pretty staggering decline for long term Treasuries, but (hopefully) everyone who owns those knew what they were getting into. I knew that I was taking on the risk of a steep short term decline when I bought EDV. Didn't expect yields to climb this quickly, but oh well. Higher yields will pay off eventually.
For the total bond crowd, the short end of the Treasury yield curve and corporate bonds are keeping things steady.
And if the US's yield curve starts looking like Japan's or Germany's, then total bond will be up significantly, and HYSAs will be paying nothing. Reinvestment risk is the other side of principal risk.
Last edited by Dominic on Tue Feb 16, 2021 7:23 pm, edited 1 time in total.
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Re: Bonds in free fall
It is the point. But it dawned on me I don't really need bonds at all. Instead of rebalancing, I just dumped it and bought more equities. I'll ride out a crash should there be one.Triple digit golfer wrote: ↑Tue Feb 16, 2021 7:20 pmIsn't that the point? Negative correlations and all. Why didn't you rebalance?Marseille07 wrote: ↑Tue Feb 16, 2021 7:14 pm I find it alarming. Already ran to the hills!
I'm learning that holding a hedge carries its own set of challenges. My risk tolerance is a lot shallower because of devastation that it's collapsing as equities are soaring.
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Re: Bonds in free fall
This isn't really abnormal behavior for EDV. Even with the supposed bloodbath in bonds, my overall portfolio is up on the day. If this trend continues much longer, I will hit a band and need to rebalance from stocks back into EDV. It seems to be working as intended!
Re: Bonds in free fall
Why are you looking at YTD? The fund's average duration is over six years, so why should six weeks mean anything?
A useful razor: anyone asking about speculative strategies on Bogleheads.org has no business using them.
Re: Bonds in free fall
Folks,
Some folks believe that LTT has a negative correlation with the stock. Hence, it will be much more volatile and useful to rebalance between LTT and Total Stock Market Index / S&P 500. And, the volatility had shown up. Why is this a problem? Isn't this the goal of LTT in the first place?
As for boring folks like me, I am just using VBTLX to dampen the volatility of the stock. And, it achieved its goal too.
To each its own. Please remember why you invest in the LTT.
KlangFool
Some folks believe that LTT has a negative correlation with the stock. Hence, it will be much more volatile and useful to rebalance between LTT and Total Stock Market Index / S&P 500. And, the volatility had shown up. Why is this a problem? Isn't this the goal of LTT in the first place?
As for boring folks like me, I am just using VBTLX to dampen the volatility of the stock. And, it achieved its goal too.
To each its own. Please remember why you invest in the LTT.
KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
Re: Bonds in free fall
This is likely true, though HYSA has a yield premium over T-bills, i.e. a better risk-adjusted return.
Re: Bonds in free fall
I guess I understand why folks are concerned, but seeing LTT yields go higher than my effective mortgage rate and approach the sticker-price rate has me licking my chops.
A useful razor: anyone asking about speculative strategies on Bogleheads.org has no business using them.
Re: Bonds in free fall
If you don't like bonds, don't buy 'em but at least know what they are for if you do. I think that Nisiprius is dead-on. On to ignoring this clickbaity thread.
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Re: Bonds in free fall
It's rough. Even my diamond hands got burned holding bonds.
Re: Bonds in free fall
I have trouble understanding the argument that long term interest rate movements aren't relevant when long term interest rates have been widely cited as a justification for stock valuations.
When LT rates are low, we hear that stocks are fairly valued due to low LT rates.
When LT rates creep up, we hear that LT rates don't matter unless you have an individual position in LT bonds.
When LT rates are low, we hear that stocks are fairly valued due to low LT rates.
When LT rates creep up, we hear that LT rates don't matter unless you have an individual position in LT bonds.