Vanguard Government Bond Index Funds changing names and indices (dropping agency bonds)

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weltschmerz
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Re: Vanguard Government Bond Index Funds changing names and indices (dropping agency bonds)

Post by weltschmerz » Sat Aug 12, 2017 9:03 pm

Doc wrote:
Sat Aug 12, 2017 6:15 pm
The Dan wrote:
Sat Aug 12, 2017 2:49 pm
OK, but has that mattered? Comparing the 5-year returns of the indexed version (VSIGX) to the active version (VFIUX)
Your chart appears to be for 5 days not 5 years.

That said what happened in the last 5 years matters little. The bond market has been atypical since Lehman.
Doc, look a bit closer. The chart shows over a 5% return over the last 5 years. The horizontal axis is Jul 2012, Jul 2013.... I pulled it right off the Vanguard website. Sorry for the confusing axis labels.

Regardless of how atypical the bond market has been since Lehman, I believe these 2 funds will have almost identical performance going forward. I guess we will see.

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Doc
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Re: Vanguard Government Bond Index Funds changing names and indices (dropping agency bonds)

Post by Doc » Sun Aug 13, 2017 8:06 am

The Dan wrote:
Sat Aug 12, 2017 9:03 pm
Doc, look a bit closer. The chart shows over a 5% return over the last 5 years. The horizontal axis is Jul 2012, Jul 2013.... I pulled it right off the Vanguard website. Sorry for the confusing axis labels.
Yeh, I woke up at about 3 am and realized that was not 5 days last month. My bad'

I think a better way to look at things like this is with a rolling return chart.

Image
http://quotes.morningstar.com/chart/fun ... 22%3A60%7D

This chart is for five year periods so as to compare better to your chart. I usually use a three year period myself. If you go to the Morninginstar link there is a slider at the bottom right you can move to easily look into the past.

The active fund has a slightly higher return for all the five year periods available except for one when they were equal. But the index fund has a longer duration and therefore would be expected to have higher returns.

Going forward one would expect that any credit risk difference if any, would diminish and you would be left with only the term risk. I would predict that the active fund would be able to pick up enough extra by positioning on the yield curve to overcome any e/r difference.

Of course this all depends on Vanguard not changing their index bogey again.
JoMoney wrote:
Fri Aug 11, 2017 7:46 am
It's hard for an index investor to "stay the course" tracking an index when the mutual fund company won't stop monkeying with what index their fund is going to track.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

VaR
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Re: Vanguard Government Bond Index Funds changing names and indices (dropping agency bonds)

Post by VaR » Mon Aug 14, 2017 12:56 am

Doc wrote:
Fri Aug 11, 2017 6:31 am
GSE mortgage pools do not have a US guarantee.

Because GSEs are in receivership their actual notes have an implied US guarantee.
The mortgages underlying Agency MBS have principal and interest guaranteed by the GSE, so to the extent that you believe that the GSE has implied government backing, the mortgages guaranteed by them are themselves implied to have implied government backing.

BTW, do you mean that because the GSEs are in receivership their notes have an explicit government guarantee? Because they've always maintained their implicit guarantee - that is, that they are too big and important for the government to allow them to fail. And indeed they were.

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Re: Vanguard Government Bond Index Funds changing names and indices (dropping agency bonds)

Post by Doc » Mon Aug 14, 2017 8:34 am

VaR wrote:
Mon Aug 14, 2017 12:56 am
BTW, do you mean that because the GSEs are in receivership their notes have an explicit government guarantee? Because they've always maintained their implicit guarantee - that is, that they are too big and important for the government to allow them to fail. And indeed they were.
I picked keep up the "receivership" in something I read on line. It likely had the too big to fail concept included in the discussion.

I avoid MBS because of the negative convexity not because of a default factor. My question here is only why GSA mortgages are considered Government and other mortgages go in the securitized accordingly to Vanguard but not Morningstar.

Vg TBM fund VBTLX

Vanguard: 64.0% US Government (see edit below)
Morningstar: 45.0% (all) Government

The difference is the agency MBS assignment.

Edit: the Vanguard 64.0% refers to US Government "credit quality".
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

simplesauce
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Changes coming for 3 Vanguard Bond Index funds

Post by simplesauce » Thu Aug 17, 2017 9:10 am

[merged this topic and its reply into the existing thread - moderator prudent]

Can someone explain to me what the potential impact might be?

http://www.vanguard.com/pdf/contltr.pdf

lazyday
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Re: Changes coming for 3 Vanguard Bond Index funds

Post by lazyday » Thu Aug 17, 2017 9:29 am

Not much impact, they are mostly invested in Treasuries already.

Should have slightly lower risk and return, and according to some people will mix with equities better.

discussed here: viewtopic.php?f=10&t=225281

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