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Re: SEC Yield, YTM, Distribution Yield, Current Yield

I thought it might be useful to summarize the OP without all of the detailed explanations and math. - SEC yield for a bond fund is analogous to yield to maturity (YTM) for an individual bond. These yield measures factor in change in bond price in addition to coupon payments (dividend distributions)....
by Kevin M
Thu Oct 30, 2014 1:40 pm
 
Forum: Investing - Theory, News & General
Topic: SEC Yield, YTM, Distribution Yield, Current Yield
Replies: 1
Views: 219

Re: Questions on bond funds in taxable

Thanks so much for this wrap-up after a long complicated thread. I hadn't considered that CD's would be a stronger investment than bonds, and will take a closer look into them. You're welcome. "Stronger" may not be quite the right word, but CDs are certainly worth looking at. Since you're...
by Kevin M
Thu Oct 30, 2014 10:53 am
 
Forum: Investing - Help with Personal Investments
Topic: Questions on bond funds in taxable
Replies: 22
Views: 1422

Re: Questions on bond funds in taxable

So, back to the OP ... Hopefully you haven't become too confused with the jargon and theoretical dissertations, but the bottom line is that at a 25% marginal federal tax rate, it's pretty much a toss-up between Total Bond Market fund (TBM) and Intermediate-Term Tax-Exempt bond fund in a taxable acco...
by Kevin M
Wed Oct 29, 2014 11:29 pm
 
Forum: Investing - Help with Personal Investments
Topic: Questions on bond funds in taxable
Replies: 22
Views: 1422

Re: Yield Curve Investigations

MB, I don't know the answer to your puzzle, but I can say that I've seen similarly puzzling things when looking at zero coupon bonds. There are instances of identical types of STRIPS (i.e., stripped coupon or stripped principal) with exactly the same maturity date but with different prices/yields. H...
by Kevin M
Wed Oct 29, 2014 9:52 pm
 
Forum: Investing - Theory, News & General
Topic: Yield Curve Investigations
Replies: 20
Views: 1558

Re: Should I use margin to buy a balanced fund?

Having diverse asset classes in a portfolio gives you higher risk-adjusted returns which allows you to get the most out of leverage. MPT gives you that. It's the only free lunch in investing. That's why the Sharpe ratio is important. There is a super-efficient portfolio that has the highest Sharpe ...
by Kevin M
Wed Oct 29, 2014 9:36 pm
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 415
Views: 36968

SEC Yield, YTM, Distribution Yield, Current Yield

I own muni bond funds and direct CDs (purchased directly from banks and credit unions). The CDs are safer, since they have no credit risk and low term risk due to the early withdrawal option, but the muni bond funds might provide higher after-tax yields in return for taking some credit risk and more...
by Kevin M
Wed Oct 29, 2014 7:57 pm
 
Forum: Investing - Theory, News & General
Topic: SEC Yield, YTM, Distribution Yield, Current Yield
Replies: 1
Views: 219

Re: Should I use margin to buy a balanced fund?

Having diverse asset classes in a portfolio gives you higher risk-adjusted returns which allows you to get the most out of leverage. MPT gives you that. It's the only free lunch in investing. That's why the Sharpe ratio is important. There is a super-efficient portfolio that has the highest Sharpe ...
by Kevin M
Wed Oct 29, 2014 5:39 pm
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 415
Views: 36968

Re: Questions on bond funds in taxable

I would start by comparing individual securities that are most comparable to each other. If a bond fund has a higher yield, then it is riskier. I just happened to be doing some analysis of 5-year California muni bonds, as this would be the tax-exempt bond that would be most directly comparable to a ...
by Kevin M
Wed Oct 29, 2014 4:37 pm
 
Forum: Investing - Help with Personal Investments
Topic: Questions on bond funds in taxable
Replies: 22
Views: 1422

Re: Yield Curve Investigations

It really gets confusing when someone says that the current rate is 3% and rates will rise 2%. Do they mean that it will from 3% to 5% ? Or that it will rise from 3.00% to 3.06%. It's clearer to say that rate is 3% and it will rise 200 basis points. I agree completely, and prefer to describe differ...
by Kevin M
Wed Oct 29, 2014 2:28 pm
 
Forum: Investing - Theory, News & General
Topic: Yield Curve Investigations
Replies: 20
Views: 1558

Re: Yield Curve Investigations

With all of the complications that come with individual credit bonds - calls, special provisions, insurance, coupon effects, bid-ask spreads, etc, maybe the highest yielding individual bond isn't what one should use to make yield comparisons between bond types, especially against treasuries. Good p...
by Kevin M
Wed Oct 29, 2014 2:14 pm
 
Forum: Investing - Theory, News & General
Topic: Yield Curve Investigations
Replies: 20
Views: 1558

Re: Yield Curve Investigations

I think you are commingling different investments and its getting me confused. The same term applied to bonds does not mean the same thing when applied to bond funds . "Reinvestment" risk has no real meaning when you are addressing a yield curve. Yield to maturity and duration are usually...
by Kevin M
Wed Oct 29, 2014 1:31 pm
 
Forum: Investing - Theory, News & General
Topic: Yield Curve Investigations
Replies: 20
Views: 1558

Re: Yield Curve Investigations

I've never invested in muni's, and I'll probably never be in a situation to justify doing so, but I'd always thought they were discounted relative to treasuries and have been really surprised at how high they've been, but never have asked about it. Having spent quite a while looking at your graph a...
by Kevin M
Tue Oct 28, 2014 9:54 pm
 
Forum: Investing - Theory, News & General
Topic: Yield Curve Investigations
Replies: 20
Views: 1558

Re: Should I use margin to buy a balanced fund?

My largest criticism of people who study leverage and publish tend to only look at a single asset class (stocks) instead of how a leveraged asset performs in a balanced portfolio with other negative/uncorrelated assets. I realized that I was doing the exact same thing. And that's when I finally dec...
by Kevin M
Tue Oct 28, 2014 9:12 pm
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 415
Views: 36968

Re: Yield Curve Investigations

Some of the replies so far have touched on issues related to the risk structure of interest rates, which deals with yields for fixed-income securities of the same maturity but with different risk characteristics. It would be helpful if people would use the phrase "term risk" and "cre...
by Kevin M
Tue Oct 28, 2014 6:46 pm
 
Forum: Investing - Theory, News & General
Topic: Yield Curve Investigations
Replies: 20
Views: 1558

Re: Are we really in the 0% bracket?

The way I have figured out how these things work is to use the desktop version of TT, and view the actual forms and calculation worksheets after making a change. This is not possible with the online version of TT (at least not as easily, and not until you've paid and can view the forms). With the de...
by Kevin M
Tue Oct 28, 2014 5:21 pm
 
Forum: Personal Finance (Not Investing)
Topic: Are we really in the 0% bracket?
Replies: 28
Views: 3212

Re: Yield Curve Investigations

My yield curve investigations so far (including some not yet shared) have been focused on the term structure of interest rates, which deals with yields at various maturities for bonds with similar characteristics, and I've looked exclusively at Treasury securities. Some of the replies so far have to...
by Kevin M
Tue Oct 28, 2014 4:06 pm
 
Forum: Investing - Theory, News & General
Topic: Yield Curve Investigations
Replies: 20
Views: 1558

Re: Should I use margin to buy a balanced fund?

Compound annual growth rate (CAGR) / geometric mean is a very important measure that we only know after the fact. MPT uses arithmetic mean and standard deviation, but the article you posted gives an approximation for calculating expected CAGR from arithmetic mean and standard deviation. We also onl...
by Kevin M
Tue Oct 28, 2014 1:15 pm
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 415
Views: 36968

Re: Yield Curve Investigations

And of course for shorter term instruments there are various FDIC insured CD's popping up at times that will beat the curve. This is getting a bit off topic, but it's more than just "popping up at times". Five-year CD rates have consistently been higher than 5-year Treasuries for the last...
by Kevin M
Mon Oct 27, 2014 10:49 pm
 
Forum: Investing - Theory, News & General
Topic: Yield Curve Investigations
Replies: 20
Views: 1558

Re: Yield Curve Investigations

Good topic Kevin. In addition to this, a suggestion is to plot the TIPS yield curve and compare this to the nominal curve. This gives the inflation expectation of the market, but also interesting in that during crises, the 2 curves don't seem to move in parallel. Good topic for a future post. Also,...
by Kevin M
Mon Oct 27, 2014 9:16 pm
 
Forum: Investing - Theory, News & General
Topic: Yield Curve Investigations
Replies: 20
Views: 1558

Yield Curve Investigations

As many Bogleheads know, a yield curve is a plot of Yield to Maturity vs. Term to Maturity for a collection of bonds with similar characteristics. A commonly referenced source of yield curve data is the Daily Treasury Yield Curve Rates , commonly referred to as "Constant Maturity Treasury"...
by Kevin M
Mon Oct 27, 2014 2:43 pm
 
Forum: Investing - Theory, News & General
Topic: Yield Curve Investigations
Replies: 20
Views: 1558

Re: So do we care more about change in bond price or bond yi

For completeness, I added in the average bid yields of coupon bonds for comparison to the zeros. Here is the chart for maturities up to 10 years: http://s26.postimg.org/pnfcboypl/TBond_TNote_stripped_principal_stripped_coupon.png So lower yields than stripped principal zeros (at least visible beyond...
by Kevin M
Sun Oct 26, 2014 3:02 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13411

Re: So do we care more about change in bond price or bond yi

One thing I noticed is that there are STRIPS with the exact same maturity date but different prices/yields. Explanation? You strip a particular issue into two parts therefore you always should have three types for the same original maturity. :idea: I should have been more specific, but it was in th...
by Kevin M
Sun Oct 26, 2014 2:12 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13411

Re: So do we care more about change in bond price or bond yi

This idea of buying a 10-year STRIP and then selling it after one year sounds appealing. Just remember that with this strategy you're making a bet on the 9-year rate/price one year after settlement. Your expected 1-year return is the the forecast Yield-to-Horizon (YTH) using your estimate of the 9-...
by Kevin M
Sat Oct 25, 2014 11:54 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13411

Re: So do we care more about change in bond price or bond yi

I think it looks better than the previous chart. So we can compare the two plots using the same data, here is the YTM vs. Term to Maturity (TTM) for the data from the WSJ: http://s26.postimg.org/t3g6tctrt/Yield_vs_Maturity_WSJ_quotes.png And here again is the plot of Duration vs. TTM for that data:...
by Kevin M
Fri Oct 24, 2014 9:13 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13411

Re: Importing yields from treasury.gov into Google spreadshe

As mentioned in previous post, I've figured out how to retrieve the rates directly from the treasury.gov rates page intended for human viewing. The key was the technique of using the Inspect element tool in the Chrome browser. Inspecting elements of the rates page and copying the xpath gave me xpath...
by Kevin M
Fri Oct 24, 2014 7:21 pm
 
Forum: Investing - Theory, News & General
Topic: Importing yields from treasury.gov into Google spreadsheet
Replies: 14
Views: 1009

Re: Importing yields from treasury.gov into Google spreadshe

Thanks for the input Angie. Apparently the files I'm using are "legacy" files. You can get to the current month legacy file by clicking on the link "To access interest rate data in the legacy XML format and the corresponding XSD schema, click here", but there are no links on the ...
by Kevin M
Fri Oct 24, 2014 6:44 pm
 
Forum: Investing - Theory, News & General
Topic: Importing yields from treasury.gov into Google spreadsheet
Replies: 14
Views: 1009

Re: So do we care more about change in bond price or bond yi

Maybe there is too much data. Is there anything that the "spikes" have in common? Are they random or is there something else in there that we can speculate about? EDIT: I assume you're talking about the yield vs. duration chart. We already know the spikes in the yield vs. term to maturity...
by Kevin M
Fri Oct 24, 2014 5:50 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13411

Re: So do we care more about change in bond price or bond yi

A common interpretation of YTM is the annualized rate of return you would earn if you reinvested all coupons at a rate equal to the YTM. That is a common interpretation but it isn't actually true. If you look at the equation to determine YTM it is the present value equation which in non bond speak ...
by Kevin M
Fri Oct 24, 2014 5:24 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13411

Yield vs. Duration

Have you thought about constructing a yield curve with the x axis as duration instead of maturity. I think Fido has all the data needed in their quotes. I think all the "outliers" will disappear with this presentation. I can do that. But I'll do it from the WSJ quotes, since there is more...
by Kevin M
Fri Oct 24, 2014 5:08 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13411

Importing yields from WSJ into Google spreadshe

I discovered last night that treasury quotes can be imported from the WSJ website with ImportXML. Here are the URL and xpath_query to use: http://online.wsj.com/mdc/public/page/2_3020-treasury.html (//table)[3]//tr Before figuring out the xpath that works, I found that it's even easier to import the...
by Kevin M
Fri Oct 24, 2014 3:08 pm
 
Forum: Investing - Theory, News & General
Topic: Importing yields from treasury.gov into Google spreadsheet
Replies: 14
Views: 1009

Re: So do we care more about change in bond price or bond yi

By the way, I made a startling discovery yesterday about bonds and YTM. You better be sitting down for this: :idea: The Yield-to-Maturity for Coupon Bonds is a fictitious number. Now it may be a useful fiction, but is nevertheless fictitious. The implication is that if you draw the Treasury Yield C...
by Kevin M
Fri Oct 24, 2014 2:15 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13411

Re: Importing yields from treasury.gov into Google spreadshe

Don't kick yourself, but it's right there on the yield curve page Now that I've checked it out, I see that it's similar to what you get when you just click on the XML button. I had already played with that, but the problem is that it's not in an XML format the ImportXML seems to understand--at leas...
by Kevin M
Thu Oct 23, 2014 2:41 pm
 
Forum: Investing - Theory, News & General
Topic: Importing yields from treasury.gov into Google spreadsheet
Replies: 14
Views: 1009

Re: Importing yields from treasury.gov into Google spreadshe

You can use some spreadsheet magic to grab the yields for just the most recent date (one row), but you also can do that with this xpath_query: //G_WEEK_OF_MONTH[last()]//G_NEW_DATE[last()]//G_BC_CAT While working on the xpath to get just the most recent date from the current month file, I learned s...
by Kevin M
Thu Oct 23, 2014 11:43 am
 
Forum: Investing - Theory, News & General
Topic: Importing yields from treasury.gov into Google spreadsheet
Replies: 14
Views: 1009

Re: Importing yields from treasury.gov into Google spreadshe

I cannot find the xml files for years 2011 through 2014. Does anyone know where they are??? Kevin, I believe this will get you the data you want for 2011- present. It's not as nicely formatted though as in the xml you found. The dates throughout the year jump around, contrary to your file in which ...
by Kevin M
Thu Oct 23, 2014 11:14 am
 
Forum: Investing - Theory, News & General
Topic: Importing yields from treasury.gov into Google spreadsheet
Replies: 14
Views: 1009

Re: Importing yields from treasury.gov into Google spreadshe

I haven't use google spreadsheets before. But, for this data I've always just used copy and paste from the website (e.g. http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yieldYear&year=2013) into a LibreOffice spreadsheet Sure, that's what I've d...
by Kevin M
Wed Oct 22, 2014 10:11 pm
 
Forum: Investing - Theory, News & General
Topic: Importing yields from treasury.gov into Google spreadsheet
Replies: 14
Views: 1009

Re: So do we care more about change in bond price or bond yi

Given two bonds with the same maturity date, the one with the higher coupon will have a lower duration. So, the bumps probably indicate that that bonds trade more on the basis of duration than maturity. Yes, that's pretty much what I said, and it also explains the slightly higher yields (and lower ...
by Kevin M
Wed Oct 22, 2014 9:56 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13411

Re: Importing yields from treasury.gov into Google spreadshe

Kevin M wrote:I cannot find the xml files for years 2011 through 2014. Does anyone know where they are???

So 115 views and no replies. I guess that means no one who has viewed the post knows where the missing yield files are or has any tips on how to find them?

Kevin
by Kevin M
Wed Oct 22, 2014 8:00 pm
 
Forum: Investing - Theory, News & General
Topic: Importing yields from treasury.gov into Google spreadsheet
Replies: 14
Views: 1009

Re: So do we care more about change in bond price or bond yi

Note that there are many more maturities for non-zeros (hence the gaps in the red curve), and note the little wiggles in the curve for non-zeros. I don't see any obvious reason for the wiggles, e.g., due to different coupons. It looks like they are older bonds with very high coupons. I looked at th...
by Kevin M
Wed Oct 22, 2014 7:56 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13411

Re: So do we care more about change in bond price or bond yi

A few updates ... Below is a snapshot of the zero and non-zero 3-10 year yield curves based on average Fidelity bid yields for each maturity as of a few minutes ago. Red curve is for zero-coupon bonds, blue is for non-zero coupon bonds. http://s26.postimg.org/labacs2pl/Fidelity_yield_curves.png Note...
by Kevin M
Wed Oct 22, 2014 4:15 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13411

Importing yields from treasury.gov into Google spreadsheet

During the last few days I've spent some time learning how to import yield-curve yields from treasury.gov into a Google sheet using the ImportXml function. I'm sharing some things I've learned here, but also asking for help if with filling in the gaps in my knowledge. ---------- Locations of the XML...
by Kevin M
Tue Oct 21, 2014 10:20 pm
 
Forum: Investing - Theory, News & General
Topic: Importing yields from treasury.gov into Google spreadsheet
Replies: 14
Views: 1009

Re: So do we care more about change in bond price or bond yi

And Kevin it is very possible to accurately do the discounted cash flow equations in your head if you had taken the time to memorize the data in the log table book when you were in high school which is very helpful if you are now of the age that you have to relearn Excel every time you load it. :be...
by Kevin M
Tue Oct 21, 2014 6:56 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13411

Re: Ultimate Buy and Hold - 8 slices vs 4

Unfortunately I cannot buy past returns. I would like to see a bit more than a chart. I would like to see some academic evidence, such as is available for small and value, that gives me a feel that the out performance has some diversification or risk/return benefit, and some indication that it may ...
by Kevin M
Tue Oct 21, 2014 4:27 pm
 
Forum: Investing - Theory, News & General
Topic: Ultimate Buy and Hold - 8 slices vs 4
Replies: 632
Views: 219882

Re: So do we care more about change in bond price or bond yi

Got it--I see what you're doing now. I've never actually messed much with zero-coupon bonds before. Cool. The principle is the same for coupon bonds. I thought of a better way to explain what settlement date to use. Using zero coupon bonds just simplifies the algebra, but the principle with respect...
by Kevin M
Tue Oct 21, 2014 4:06 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13411

Re: Ultimate Buy and Hold - 8 slices vs 4

Do you see a pattern for the health care sector? Yes. http://s26.postimg.org/atd7nbem1/Healthcare_sector_1.png Blue line is Vanguard Healthcare, orange is healthcare sector average, and green is 500 index, chosen for longest time period comparison. But that goes back further than VG small-cap value...
by Kevin M
Tue Oct 21, 2014 12:00 am
 
Forum: Investing - Theory, News & General
Topic: Ultimate Buy and Hold - 8 slices vs 4
Replies: 632
Views: 219882

Re: So do we care more about change in bond price or bond yi

I don't think I agree with your inputs into the PRICE function. When calculating the price gain from holding the bond, I think you need to use a settlement date one year in the future (i.e. 10/20/15) as that is what the price one-year from now would be based on. I don't think so. The assumption of ...
by Kevin M
Mon Oct 20, 2014 11:31 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13411

Re: So do we care more about change in bond price or bond yi

Continuing with my attempts to graphically illustrate the relationship between price change, time-to-maturity change, yield change, and return, below is a chart built as follows. ⋅ Use the latest yield curve rates from treasury.gov, and use linear interpolation to populate values for the m...
by Kevin M
Mon Oct 20, 2014 8:17 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13411

Re: So do we care more about change in bond price or bond yi

Kevin, first what are you doing up at 3 O'clock in the AM posting about bond yields. It was only 11:30pm my time. This is telling me that yield-curve-riding has an effect that cannot be explained by duration and active management can have a positive effect as long as the yield curve shifting that K...
by Kevin M
Sun Oct 19, 2014 9:38 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13411

Re: So do we care more about change in bond price or bond yi

I thought it would be interesting to look at some returns for a fairly recent 2-3 year period when the yield curve went from moderately steep to flat. I'll continue to use zero-coupon bonds since all return is from price-change, so it's easier to see the offsetting effects on price of maturation and...
by Kevin M
Sun Oct 19, 2014 3:31 am
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13411

Re: Should I use margin to buy a balanced fund?

You can get the term risk premium by bond investing, and once again, it doesn't correlate well with the equity risk premium. Depends what you mean by "doesn't correlate well". The long-term correlation of 10-year T bonds and S&P500 (1928-2013) is -0.03. This is the same as the long-te...
by Kevin M
Fri Oct 17, 2014 10:09 pm
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 415
Views: 36968

Re: So do we care more about change in bond price or bond yi

On one hand, I'm comfortable saying that the Treasury market is ruthlessly efficient. As such, a rolling ladder with a 5 year duration and a "bullet" strategy with a 5 year duration have very similar risks and should expect the same returns. With this thinking, there is nothing magicial a...
by Kevin M
Fri Oct 17, 2014 8:21 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13411
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