Bnd vs T-bill
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Bnd vs T-bill
Say one is at 60/40 stock/bond retirement portfolio. With BND currently yielding 2.7%, why not sell BND and buy 1 year T-bill yielding a little over 5%? Is it just the hope of BND price increasing?
Re: Bnd vs T-bill
According to VG, the yield in BND is 4.21%
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
Re: Bnd vs T-bill
Your yield for BND doesn't look right.
BND has a much longer duration than t bills. The rate is effectively "locked in" for a longer time. If rates go down next year, your t bill will mature into lower rate market and you need to reinvest into lower rate. BND will appreciate since the duration is longer.
BND has a much longer duration than t bills. The rate is effectively "locked in" for a longer time. If rates go down next year, your t bill will mature into lower rate market and you need to reinvest into lower rate. BND will appreciate since the duration is longer.
Re: Bnd vs T-bill
The fear is yields decrease, also known as reinvestment risk (you risk reinvesting at a lower yield). BND price increasing would be a bad thing if you're a long-term investor.theplayer11 wrote: ↑Fri Jun 09, 2023 6:34 am Say one is at 60/40 stock/bond retirement portfolio. With BND currently yielding 2.7%, why not sell BND and buy 1 year T-bill yielding a little over 5%? Is it just the hope of BND price increasing?
Re: Bnd vs T-bill
BND yield is 4.21%.theplayer11 wrote: ↑Fri Jun 09, 2023 6:34 am Say one is at 60/40 stock/bond retirement portfolio. With BND currently yielding 2.7%, why not sell BND and buy 1 year T-bill yielding a little over 5%? Is it just the hope of BND price increasing?
Bonds have longer duration. When a bond is held, you get the coupon payment longer. That’s why it is called fixed income.
If you buy a 1-year t bill, what do you do in year 2? You have to buy something new. What if the yield on t bills is 2% then and the yield on BND is 4% or 3%? Well, then you have to come crawling back to buy BND and you’ve lost out on growth in the meantime, and you’re paying more to get the same coupon payments you could have gotten at the start
If you need the money in one year, buy a one year t bill. If you need the money in the further-out future, buy a longer-duration bond
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Re: Bnd vs T-bill
^ You're comparing the distribution yield to the SEC yield. There's information on the Wiki which you might find helpful.
Re: Bnd vs T-bill
BND you cannot do liability matching duration as it has more or less constant duration so may incur a loss when withdrawing. TBIlls duration can be chosen to match liability which is one reason I am trying to get rid of BND and move to TBills over time. But returns may be lower for TBills long term
80% VOO | 20% BND+TBILL+CASH | Don't believe Nobody because Nobody knows nothin' - Anon
Re: Bnd vs T-bill
You can approximate liability duration matching with funds by using two funds that average to the duration you want. If your target is less than one year, tbills are the better course.ebeb wrote: ↑Fri Jun 09, 2023 9:47 am BND you cannot do liability matching duration as it has more or less constant duration so may incur a loss when withdrawing. TBIlls duration can be chosen to match liability which is one reason I am trying to get rid of BND and move to TBills over time. But returns may be lower for TBills long term