Sell BND and buy T bills?

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idoc2020
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Sell BND and buy T bills?

Post by idoc2020 »

I realize that if rates come down, BND will increase in value. However, isn't a bird in the hand worth two in the bush? T bills are yielding good money right now and it appears to be the place to be. Even if one loses the opportunity to be in a bond fund when rates start coming down, there may be an upside to having some dry powder to invest in equity if the market craters. My plan is one year T bill and then possibly diverting that money after a year to the equity markets (if there's a hot sale going on). If rates are stable or still going up, I can just purchase other T bills. Seems like this gives me more hand on control than holding BND.
jebmke
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Re: Sell BND and buy T bills?

Post by jebmke »

If they go down, then you have the reinvestment risk bad outcome.

Looks like you are trying to time both the bond market and the stock market. Good luck with that.
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idoc2020
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Re: Sell BND and buy T bills?

Post by idoc2020 »

It's not purely timing. The fact that you can actually get a guaranteed 5.2% right now on a one year T bill is not timing, it's fact. The only issue is what the options are at the end of the year. I was trying to evaluate if there were two paths at that point depending on where rates were going. If they are going up, redeem the T bill and buy more. If they have been going down rapidly, it may be linked to a softening of the economy and therefore the markets may be weak. Hence, dry powder to buy. If rates are stable but poised to decline, then maybe go into a BND fund and ride the ascending yields. It's not timing, it's strategy or logic. It's looking to see what kind of opportunities may exist at various times.
ebeb
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Re: Sell BND and buy T bills?

Post by ebeb »

For purpose of TLH, I was thinking of selling some BND with capital loss, and then put the cash into TBills instead of another bond. :wink:
80% VOO | 20% BND+TBILL+CASH | Don't believe Nobody because Nobody knows nothin' - Anon
Johm221122
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Re: Sell BND and buy T bills?

Post by Johm221122 »

idoc2020 wrote: Mon May 29, 2023 11:57 am . My plan is one year T bill and then possibly diverting that money after a year to the equity markets (if there's a hot sale going on). If rates are stable or still going up, I can just purchase other T bills. Seems like this gives me more hand on control than holding BND.
That is market timing

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welderwannabe
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Re: Sell BND and buy T bills?

Post by welderwannabe »

idoc2020 wrote: Mon May 29, 2023 12:09 pm It's not purely timing. The fact that you can actually get a guaranteed 5.2% right now on a one year T bill is not timing
For my cash? Sure. For my fixed income portion, nope.

Not sure if you rode BND to the bottom or not as yields went up, but if you did you're just locking in losses.

Right now, to me, the 30Yr at 4% seems like a better deal...or even the 10Yr at 3.8%.
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Beensabu
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Re: Sell BND and buy T bills?

Post by Beensabu »

idoc2020 wrote: Mon May 29, 2023 12:09 pm The only issue is what the options are at the end of the year. I was trying to evaluate if there were two paths at that point depending on where rates were going. If they are going up, redeem the T bill and buy more. If they have been going down rapidly, it may be linked to a softening of the economy and therefore the markets may be weak. Hence, dry powder to buy. If rates are stable but poised to decline, then maybe go into a BND fund and ride the ascending yields NAV. It's not timing, it's strategy or logic. It's looking to see what kind of opportunities may exist at various times.
What if in a year, rates have already gone down but the stock market isn't weak and there is no sale to be had? What would the path be then? Buy back into BND for more than you sold?
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brec
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Re: Sell BND and buy T bills?

Post by brec »

idoc2020 wrote: Mon May 29, 2023 12:09 pm ... If rates are ... poised to decline, ... It's not timing
Just sayin'
z3r0c00l
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Re: Sell BND and buy T bills?

Post by z3r0c00l »

We can't know which one will win out in 6 years, but over the next year I would say BND is not likely to pull ahead. Do you need the money in 1 year or 6?
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Charles Joseph
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Re: Sell BND and buy T bills?

Post by Charles Joseph »

idoc2020 wrote: Mon May 29, 2023 11:57 am I realize that if rates come down, BND will increase in value. However, isn't a bird in the hand worth two in the bush? T bills are yielding good money right now and it appears to be the place to be. Even if one loses the opportunity to be in a bond fund when rates start coming down, there may be an upside to having some dry powder to invest in equity if the market craters. My plan is one year T bill and then possibly diverting that money after a year to the equity markets (if there's a hot sale going on) [this is market timing]. If rates are stable or still going up, I can just purchase other T bills. Seems like this gives me more hand on control than holding BND.
Do not do that.
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123
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Re: Sell BND and buy T bills?

Post by 123 »

We left BND last spring and have been in Tbills ever since, a ladder of 12 month Tbills seems to be working okay for us. Yeah I would rather be in BND for convenience but I'm not willing to take the NAV risk at this time should interest rates continue to rise.
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z3r0c00l
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Re: Sell BND and buy T bills?

Post by z3r0c00l »

123 wrote: Mon May 29, 2023 9:50 pm We left BND last spring and have been in Tbills ever since, a ladder of 12 month Tbills seems to be working okay for us. Yeah I would rather be in BND for convenience but I'm not willing to take the NAV risk at this time should interest rates continue to rise.
More than even odds that they will at this point too.
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chrisdds98
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Re: Sell BND and buy T bills?

Post by chrisdds98 »

bogleheads seem to really like BND and I never really understood that. we've learned that the rating agencies are completely garbage and that lesson was relearned when we saw failed banks have bonds rated at investment grade instead of the junk they were. a treasury fund seems more sensible. SCHP - intermediate TIPS or VGIT intermediate treasuries seem like better options with much lower default risk than corporate bonds
Topic Author
idoc2020
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Re: Sell BND and buy T bills?

Post by idoc2020 »

z3r0c00l wrote: Mon May 29, 2023 7:18 pm We can't know which one will win out in 6 years, but over the next year I would say BND is not likely to pull ahead. Do you need the money in 1 year or 6?
Precisely my point. I feel confident, not 100% sure, that BND will not be shooting up any time soon. The real question for the short term is will rates remain stable or will they creep up. Nobody serious is expecting them to plummet. Not impossible, just highly unlikely. But getting +5.2% from a T bill is guaranteed. I think I could TLH my BND losses, get a 1 yr T bill and still have a decent chance at repurchasing BND at these low prices. I have a built in buffer of 5% in any case.
CuriousIndexer
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Re: Sell BND and buy T bills?

Post by CuriousIndexer »

idoc2020 wrote: Mon May 29, 2023 11:05 pm
z3r0c00l wrote: Mon May 29, 2023 7:18 pm We can't know which one will win out in 6 years, but over the next year I would say BND is not likely to pull ahead. Do you need the money in 1 year or 6?
Precisely my point. I feel confident, not 100% sure, that BND will not be shooting up any time soon. The real question for the short term is will rates remain stable or will they creep up. Nobody serious is expecting them to plummet. Not impossible, just highly unlikely. But getting +5.2% from a T bill is guaranteed. I think I could TLH my BND losses, get a 1 yr T bill and still have a decent chance at repurchasing BND at these low prices. I have a built in buffer of 5% in any case.
What made you settle on a 1 year t bill? Why not shorter duration?
Marseille07
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Re: Sell BND and buy T bills?

Post by Marseille07 »

jebmke wrote: Mon May 29, 2023 11:59 am If they go down, then you have the reinvestment risk bad outcome.

Looks like you are trying to time both the bond market and the stock market. Good luck with that.
Unless you hold long bonds directly till maturity, you have the reinvestment risk regardless.

The fund manager of BND or what have you maintains constant maturity. The yield on new purchases might be lower than the old bonds being pushed out of the fund.
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