Why choose intermediate term treasury at this time?

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strongboy2005
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Why choose intermediate term treasury at this time?

Post by strongboy2005 » Sun Feb 10, 2019 5:04 pm

When comparing an intermediate term treasury fund, such as SCHR, with a short term treasury fund, such as SCHO, is there any reason to prefer the intermediate term fund if the yields are the same for both funds?

bluquark
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Re: Why choose intermediate term treasury at this time?

Post by bluquark » Sun Feb 10, 2019 5:12 pm

Larry Swedroe has a rule of thumb that 1 year of duration should be compensated by 20 bps of yield. There is a delta of 3 years duration and he would want 60 bps to compensate, but you get 3 bps here. So it badly fails that test.

Note that the risk on bond duration tends to be a bit countercyclical. If there’s a recession, the Fed may lower rates to juice the economy and increase the value of intermediate bonds. That would be the case for holding them uncompensated (and perhaps it’s the reason why the market as a whole is choosing to hold them uncompensated).

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arcticpineapplecorp.
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Re: Why choose intermediate term treasury at this time?

Post by arcticpineapplecorp. » Sun Feb 10, 2019 5:16 pm

the yields are not the same. close, but not the same.

scho sec yield (30 day) is 2.50% https://www.schwabfunds.com/public/csim ... ymbol=SCHO
schr sec yield (30 day) is 2.52% https://www.schwabfunds.com/public/csim ... ymbol=SCHR

average yield to maturity difference is 0.03% between short and intermediate.

If it's not enough of a difference for the extra risk of intermediate, then stay short term until the yield spread between the two funds is greater. They're both fine funds.
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whodidntante
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Re: Why choose intermediate term treasury at this time?

Post by whodidntante » Sun Feb 10, 2019 5:17 pm

I think keeping duration short is sensible right now, or at least it is sensible for me.

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Kevin M
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Re: Why choose intermediate term treasury at this time?

Post by Kevin M » Sun Feb 10, 2019 5:18 pm

strongboy2005 wrote:
Sun Feb 10, 2019 5:04 pm
When comparing an intermediate term treasury fund, such as SCHR, with a short term treasury fund, such as SCHO, is there any reason to prefer the intermediate term fund if the yields are the same for both funds?
If you are more averse to reinvestment risk than to price risk, both being different sides of the term risk coin.

If yields increase much over say the next 3-5 years, then the share price of the intermediate-term fund will fall more than that of the short-term fund, and the higher yield won't have time to make up for the loss. That's the price risk showing up, and in this case, you'd be better off with the short-term fund.

If yields decrease over the 3-5 years or so, then the short-term fund will be rolling over to the lower yields more quickly, and the share price will not increase as much as that of the intermediate-term fund. That's the reinvestment risk showing up, and in this case you'd be better off with the intermediate-term fund.

Since no one knows what will happen with yields, no one really knows which is better.

Personally, I am more averse to price risk than to reinvestment risk, whether or not it's rational, so I'm staying short term with new cash, while continuing to hold my intermediate-term funds to hedge the reinvestment risk some. Also, I tend to go with the Swedroe guideline of requiring at least 20 basis points of extra yield for each extra year of maturity, although some have argued that there is little to no empirical evidence to support this strategy.

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dbr
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Re: Why choose intermediate term treasury at this time?

Post by dbr » Sun Feb 10, 2019 5:20 pm

You could just put your bond allocation in a low cost, diversified, intermediate duration bond fund and go away. So, yes, you could make that choice.

Or, you can pour through the bond offerings and the yield curve month after month and keep moving everything to niggle out small advantages.

Each investor pays his money and gets to take his choice.

stupidkid
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Re: Why choose intermediate term treasury at this time?

Post by stupidkid » Sun Feb 10, 2019 5:30 pm

I have an intermediate treasury fund available in my 401k, fuamx. It's low cost and meets my requirement for the bond portion of my portfolio, it's low risk.

I don't worry about a few bps on that side of the portfolio because I expect income preservation from the bonds, I take risk and seek return on my equities. In the recent market dip, my intermediate treasuries were not impacted, great. I didn't really think about it though.

I haven't bought any new shares in some time as my bond allocation is met, though the monthly dividend reinvests automatically, and I count the ibonds I buy each year towards my bond allocation.

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SlowMovingInvestor
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Re: Why choose intermediate term treasury at this time?

Post by SlowMovingInvestor » Sun Feb 10, 2019 6:48 pm

bluquark wrote:
Sun Feb 10, 2019 5:12 pm
Larry Swedroe has a rule of thumb that 1 year of duration should be compensated by 20 bps of yield. There is a delta of 3 years duration and he would want 60 bps to compensate, but you get 3 bps here. So it badly fails that test.
Following that strictly, it would make sense to invest in Vanguard's Treasury Money Market Fund (2.33%) vs SCHO (2.50%).

I think the delta is around 1. 7 years.

pdavi21
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Re: Why choose intermediate term treasury at this time?

Post by pdavi21 » Sun Feb 10, 2019 7:17 pm

They are correct in saying the risk is not adequately rewarded...but just remember, yields on different bonds behave differently. Up until today (as short term bond yields were rising and intermediate bond yields were falling in relation to each other), guess which bonds outperformed...

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Re: Why choose intermediate term treasury at this time?

Post by pascalwager » Sun Feb 10, 2019 10:06 pm

SlowMovingInvestor wrote:
Sun Feb 10, 2019 6:48 pm
bluquark wrote:
Sun Feb 10, 2019 5:12 pm
Larry Swedroe has a rule of thumb that 1 year of duration should be compensated by 20 bps of yield. There is a delta of 3 years duration and he would want 60 bps to compensate, but you get 3 bps here. So it badly fails that test.
Following that strictly, it would make sense to invest in Vanguard's Treasury Money Market Fund (2.33%) vs SCHO (2.50%).

I think the delta is around 1. 7 years.
Indeed, I may put all of my FI money in the VG Treasury Fund now. I'm currently using Paul Merriman's bond portfolio composed of IT, ST, and ST TIPS, but I'm bothered by the reality of accepting IT interest rate risk for a mere 3 bps yield advantage.

The 20 bps criterion is arbitary and comes from DFA and their variable maturity approach to setting bond fund maturity (as per Gene Fama). In his bond book, Larry recommends using bonds for ballast in the accumulation stage and then, perhaps, stretching for yield in retirement--but in keeping with the 20 bps criterion. In my case, even as a retiree, I don't need to stretch for yield; and right now, there isn't sufficient yield to stretch for anyway, by anyone.

Also, as a retiree still using bonds for portfolio stability, I don't care about reinvestment risk. But other retirees may need to care.

If you want to try the variable maturity approach, Larry suggests checking yield spreads quarterly.
52/48 stocks/money market

columbia
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Re: Why choose intermediate term treasury at this time?

Post by columbia » Sun Feb 10, 2019 10:13 pm

Are you planning on retiring in the next 5 years?

Which do you think will perform better in the next 5 years, were a market crash to happen: ST or IT treasuries?

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Re: Why choose intermediate term treasury at this time?

Post by hudson » Sun Feb 10, 2019 10:40 pm

strongboy2005 wrote:
Sun Feb 10, 2019 5:04 pm
When comparing an intermediate term treasury fund, such as SCHR, with a short term treasury fund, such as SCHO, is there any reason to prefer the intermediate term fund if the yields are the same for both funds?
SCHR Exp Ratio is .06
SEC is 2.52
TTM is 2.11

SCHO
EXP is .06
SEC is 2.50
TTM is 1.78

Van Intermed Treas Admir VFIUX
SEC 2.57
Exp .1
TTM 2.48

TTM = Trailing Twelve Months Dividends....dividends paid during the last 12 months

I vote for SCHR because it has been actually paying more in interest

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Re: Why choose intermediate term treasury at this time?

Post by DB2 » Sun Feb 10, 2019 11:07 pm

bluquark wrote:
Sun Feb 10, 2019 5:12 pm
Larry Swedroe has a rule of thumb that 1 year of duration should be compensated by 20 bps of yield. There is a delta of 3 years duration and he would want 60 bps to compensate, but you get 3 bps here. So it badly fails that test.

Note that the risk on bond duration tends to be a bit countercyclical. If there’s a recession, the Fed may lower rates to juice the economy and increase the value of intermediate bonds. That would be the case for holding them uncompensated (and perhaps it’s the reason why the market as a whole is choosing to hold them uncompensated).
Would such a fed cut also help intermediate Municipal? I am still considering VWIUX.

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Kevin M
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Re: Why choose intermediate term treasury at this time?

Post by Kevin M » Sun Feb 10, 2019 11:08 pm

hudson wrote:
Sun Feb 10, 2019 10:40 pm
SCHR Exp Ratio is .06
SEC is 2.52
TTM is 2.11

SCHO
EXP is .06
SEC is 2.50
TTM is 1.78

Van Intermed Treas Admir VFIUX
SEC 2.57
Exp .1
TTM 2.48

TTM = Trailing Twelve Months Dividends....dividends paid during the last 12 months

I vote for SCHR because it has been actually paying more in interest
First, TTM is backward looking--really backward looking compared to Vanguard's distribution yield, which only uses the dividends from the previous calendar month.

Second, dividends/interest is only one component of total return, the other being capital return (mostly price change, but also capital gains distributions), and it's total return that matters.

SEC yield is a better indicator of expected (future) returns.

If you look only at interest, you would pick a high yield bond fund.

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hudson
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SEC Yield or TTM Yield

Post by hudson » Mon Feb 11, 2019 5:50 am

Kevin M wrote:
Sun Feb 10, 2019 11:08 pm
hudson wrote:
Sun Feb 10, 2019 10:40 pm
SCHR Exp Ratio is .06
SEC is 2.52
TTM is 2.11

SCHO
EXP is .06
SEC is 2.50
TTM is 1.78

Van Intermed Treas Admir VFIUX
SEC 2.57
Exp .1
TTM 2.48

TTM = Trailing Twelve Months Dividends....dividends paid during the last 12 months

I vote for SCHR because it has been actually paying more in interest
First, TTM is backward looking--really backward looking compared to Vanguard's distribution yield, which only uses the dividends from the previous calendar month.

Second, dividends/interest is only one component of total return, the other being capital return (mostly price change, but also capital gains distributions), and it's total return that matters.

SEC yield is a better indicator of expected (future) returns.

If you look only at interest, you would pick a high yield bond fund.

Kevin
Thanks Kevin!
I'm not an expert or an authority on SEC/TTM...just a long time observer who wants to figure it out. I probably should search old threads or start a new one.
Everything that you said is correct.

I'm going to drift away from the OP's question here...apologies
Here's why I like TTM...Trailing Twelve Months Yield...or how much a fund paid out during the last 12 months:
I've been watching VWIUX...Vanguard Intermediate-Term Tax-Exempt Fund Admiral Shares for a while.
I look at VWIUX's SEC yield which is 2.38%.
Then I look at the DISTRIBUTION Tab for VWIUX: https://investor.vanguard.com/mutual-fu ... ions/vwiux
Here's what it shows going back to August 2017....current distribution on top; August 31, 2017 on the bottom. I think that if you average the top 10, that'll give you TTM.
2.90%
2.94%
2.96%
2.86%
2.95%
2.87%
2.86%
2.91%
2.86%
2.91%
2.88%
2.87%
2.84%
2.83%
2.80%
2.77%
2.76%
2.77%

Kevin, I know I'm not telling you anything new; you analyze this stuff well. Before I buy anything new, I search your contributions.

If I'm looking to buy or hold VWIUX and I look at SEC and distributions or TTM. Is it useful to look at the past distributions?
If you were going to look at VWIUX's SEC yield and distributions would you predict upcoming Feb. 28th's distribution to be closer to the SEC yield or the TTM yield? For the last several years, VWIUX has been closer to the TTM yield.

I think at least with VWIUX, TTM is a great predictor of what you're gonna get. If you're looking to buy, TTM is worth knowing.
I don't feel like I have any control over predicting the other parts of total return. I can only project short term returns.

As far as going with a high yield fund, that's too risky for me.

I think using SEC yield has some failings. Above, I think that I've shown that it's not accurate in the short term. I think that SEC yield is also not accurate in the long term. Doesn't the SEC yield assume that all holdings are held to maturity? VWIUX is constantly selling and buying new bonds. (Schwab says the turnover is 15%) Wouldn't that make the SEC yield somewhat inaccurate? I don't know all of this, I'm trying to figure it out. SEC yield is still extremely valuable. For VWIUX, it makes me think that I need to keep an eye on the distributions; if they drop down to the SEC yield, then I'll be looking to change horses...but not to high yield. :)

Kent Thune discusses TTM and SEC yield here: https://www.thebalance.com/difference-b ... ld-2466432 (I know nothing about his qualifications or about the accuracy of his writings.)

More from Kevin M in 2016: viewtopic.php?p=3067217#p3067217

and in Jan. 2015: viewtopic.php?p=2339363#p2339363

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Re: Why choose intermediate term treasury at this time?

Post by Doc » Mon Feb 11, 2019 9:56 am

pascalwager wrote:
Sun Feb 10, 2019 10:06 pm
The 20 bps criterion is arbitary and comes from DFA and their variable maturity approach to setting bond fund maturity (as per Gene Fama). In his bond book, Larry recommends using bonds for ballast in the accumulation stage and then, perhaps, stretching for yield in retirement--but in keeping with the 20 bps criterion
From memory Swedroe's bond book was published in ~2006. I have not been able to find a similar type recommendation based on the last ten year's yield curve.
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Re: Why choose intermediate term treasury at this time?

Post by michaeljmroger » Mon Feb 11, 2019 10:05 am

Since nobody knows anything about the future, I'd decide on the duration depending on my time horizon. If you're investing for the long term, I'd definitely go with SCHR.

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Re: Why choose intermediate term treasury at this time?

Post by SlowMovingInvestor » Mon Feb 11, 2019 10:26 am

Kevin M wrote:
Sun Feb 10, 2019 11:08 pm
If you look only at interest, you would pick a high yield bond fund.
Or a bank loan fund/ETF -- like FFRHX (Fidelity Floating Rate High Income). 5.74% yield, interest rates reset every 90 days or so, but low credit quality

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Re: Why choose intermediate term treasury at this time?

Post by Doc » Mon Feb 11, 2019 12:02 pm

michaeljmroger wrote:
Mon Feb 11, 2019 10:05 am
Since nobody knows anything about the future, I'd decide on the duration depending on my time horizon. If you're investing for the long term, I'd definitely go with SCHR.
For similar reasoning about the unknown future I model my FI portfolio on the Barclays Capital U.S. Intermediate Government/Credit Bond Index based on ideas presented in Swedroe's "Winning Bond strategy".

Since we don't know the future I don't know when I am going to die and therefore my time horizon is about as unknown as the future Dow.

That said you seem to be basing your bond portfolio on future needs for spending not for its interaction with the equity portion of your portfolio. That's not a universal idea.
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Re: SEC Yield or TTM Yield

Post by Kevin M » Mon Feb 11, 2019 12:12 pm

hudson wrote:
Mon Feb 11, 2019 5:50 am
<snip>
I look at VWIUX's SEC yield which is 2.38%.
Then I look at the DISTRIBUTION Tab for VWIUX: https://investor.vanguard.com/mutual-fu ... ions/vwiux
Here's what it shows going back to August 2017....current distribution on top; August 31, 2017 on the bottom. I think that if you average the top 10, that'll give you TTM.
2.90%
<snip>
I didn't look at the posts of mine you linked to, but I've explained this many times in other posts. Distribution yield is somewhat analogous to the current yield of a bond, which is the coupon rate divided by the current price. I high current yield or distribution yield means that the coupon rate is higher than the yield to maturity (which I'll often just call yield). It's easier to understand with an individual bond example.

The yield (to maturity) factors in the price decline from whatever it is now to 100 at maturity. For example , if you have a 1-year bond with a 3% coupon when the 1-year yield is 2%, the price will be about 101. Your current yield (similar to distribution yield) is about 3% (=3/101), but your return if you hold to maturity will be about 2%; you will earn the 3% coupon rate but lose about 1% to price decline.

Something similar is happening to the bonds held by the fund. You're getting a higher distribution yield because of the higher coupon bonds, but the price declines of the bonds will offset the higher distribution yield over time. If yields continue at current levels or decrease, the distribution yield will gradually decline toward the SEC yield (or yield to maturity for an individual bond) as the fund rolls the bonds to bonds with lower coupon rates. We have seen this with many funds that had higher distribution yields in previous years than they do now.
If I'm looking to buy or hold VWIUX and I look at SEC and distributions or TTM. Is it useful to look at the past distributions?
If you were going to look at VWIUX's SEC yield and distributions would you predict upcoming Feb. 28th's distribution to be closer to the SEC yield or the TTM yield? For the last several years, VWIUX has been closer to the TTM yield.
Vanguard's distribution yield is useful to predict the distributions for the short term, as it changes gradually. Since Vanguard only considers income for the previous calendar month instead of the previous 12 months, distribution yield probably is a better predictor than TTM for next month's distribution.
I think at least with VWIUX, TTM is a great predictor of what you're gonna get. If you're looking to buy, TTM is worth knowing.
I don't feel like I have any control over predicting the other parts of total return. I can only project short term returns.
OK for the short term, but still, using TTM or distribution yield as an estimate of expected return over a longer period, say the duration of the fund, doesn't make much sense, just as it doesn't make sense to use the current yield of an individual bond to estimate your holding-period return. If I buy a 5-year bond or CD with the intention of holding to maturity, I want to compare the yield (to maturity) to my best estimate of the 5-year expected return of alternatives. I don't really care about next month's income, or really the income over any period, since it's the total return that I'm interested in.
As far as going with a high yield fund, that's too risky for me.
OK, but the point is that you can't just look at the income of the fund, as the price change also contributes to total return. A high-yield fund just provides an extreme example to help clarify this.
I think using SEC yield has some failings. Above, I think that I've shown that it's not accurate in the short term. I think that SEC yield is also not accurate in the long term.

Of course it's not a good predictor of short-term returns. It may not be accurate as a point prediction for longer-term returns either (as I've shown in other posts), but something in the ballpark of SEC yield probably is a reasonable estimate of expected return over a period equal to the duration of the fund. But there also is a distribution of probable values around the expected return, and historically we've seen 5-year or 10-year returns of +/- 1% (actually 1 percentage point) or even more for intermediate-term bond funds.

This is something to keep in mind when comparing a bond fund to an individual fixed-income security. The latter has a relatively certain expected return over the term to maturity, while the former has a much broader distribution of expected returns for the same holding period. But most people's holding period is longer than five years, or whatever the fund duration is, so most Bogleheads don't worry about the 5-year return.
Doesn't the SEC yield assume that all holdings are held to maturity? VWIUX is constantly selling and buying new bonds. (Schwab says the turnover is 15%) Wouldn't that make the SEC yield somewhat inaccurate? I don't know all of this, I'm trying to figure it out.

Yes, that's a good point. Not holding the bonds to maturity adds additional uncertainty to the expected return. If we assume a static, positively-sloped yield curve, the expected return is higher than the yield to maturity (or SEC yield), as there is an expected, positive, capital return component. This is commonly referred to as "roll-down return".

But since it's highly likely unlikely that the yield curve will be the same at the end of a particular holding period, this component of the return uncertain. It could be higher or lower than based on the original yield curve, and it also could be negative. (Edited to correct typo: likely -> unlikely).

With the current flattish yield curve, there is little to no expected roll-down return along much of the yield curve.
SEC yield is still extremely valuable. For VWIUX, it makes me think that I need to keep an eye on the distributions; if they drop down to the SEC yield, then I'll be looking to change horses...but not to high yield. :)
I've held onto shares of funds when the distribution yield was higher than the SEC yield, even though there were individual-security alternatives (e.g., CDs) with higher yields available, but this really is a gamble on the yield not increasing too much, in which case price decline could more than eliminate the higher distribution yield. An alternative view is that holding these funds is a hedge against reinvestment risk--the risk that yields are even lower when the individual security matures, which is my current justification for continuing to hold the bond funds I already own.

Kevin
Last edited by Kevin M on Mon Feb 11, 2019 12:46 pm, edited 1 time in total.
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Re: Why choose intermediate term treasury at this time?

Post by Doc » Mon Feb 11, 2019 12:34 pm

Kevin M wrote:
Mon Feb 11, 2019 12:12 pm
But since it's highly likely that the yield curve will be the same at the end of a particular holding period, this component of the return uncertain. It could be higher or lower than based on the original yield curve, and it also could be negative.
I think the thought goes something like "the best estimate we have of the future yield curve is the current yield curve" just not a very good one.

"highly likely" not equal "best" :D
Kevin M wrote:
Mon Feb 11, 2019 12:12 pm
With the current flattish yield curve, there is little to no expected roll-down return along much of the yield curve.
Yep.
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Re: Why choose intermediate term treasury at this time?

Post by Kevin M » Mon Feb 11, 2019 12:44 pm

Doc wrote:
Mon Feb 11, 2019 9:56 am
pascalwager wrote:
Sun Feb 10, 2019 10:06 pm
The 20 bps criterion is arbitary and comes from DFA and their variable maturity approach to setting bond fund maturity (as per Gene Fama). In his bond book, Larry recommends using bonds for ballast in the accumulation stage and then, perhaps, stretching for yield in retirement--but in keeping with the 20 bps criterion
From memory Swedroe's bond book was published in ~2006. I have not been able to find a similar type recommendation based on the last ten year's yield curve.
You're still saying this? Even after I shared the direct quote from Larry affirming this guideline in an email to me in late 2017?

Also, what's so different about the yield curve now than in 2006, and the changes in the yield curve over the last 10 years compared to the 10 years prior to 2006?

Image

Using the 10-2 as a measure, yield curve was pretty flat in 2006 and is pretty flat now. During the 10 years prior to 2006 the slope increased to about the same peak as we saw in the last 10 years, and then declined to a similar flattish curve as we have now.

The guideline can be criticized for other reasons (some have argued that the empirical evidence does not support it as being effective), but I don't see how it can be criticized based on differences in the yield curve of late vs. the yield curve in 2006 and years prior.

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Re: Why choose intermediate term treasury at this time?

Post by Kevin M » Mon Feb 11, 2019 1:02 pm

Doc wrote:
Mon Feb 11, 2019 12:34 pm
Kevin M wrote:
Mon Feb 11, 2019 12:12 pm
But since it's highly likely that the yield curve will be the same at the end of a particular holding period, this component of the return uncertain. It could be higher or lower than based on the original yield curve, and it also could be negative.
I think the thought goes something like "the best estimate we have of the future yield curve is the current yield curve" just not a very good one.

"highly likely" not equal "best" :D
That was a typo. Meant to say "highly unlikely", and have corrected it in the reply.

The main point is that there is significant uncertainty in the capital return component of a bond not held to maturity, while there is much less uncertainty in the total return of a bond held to maturity. In the latter case for a Treasury the only uncertainty is reinvestment rate, which doesn't have a huge impact at current low yields over say a 5-year holding period (cumulative return of 12% at 0% reinvestment rate and 12.6% at 2.4% reinvestment rate, assuming YTM of 2.4%).

So for the case of a Treasury fund or Treasury ladder where the securities are sold before maturity and reinvested at the long end, if you're going to assume a static yield curve for your expected return estimate, you have a much broader distribution of probable returns over a 5-year holding period than for a 5-year Treasury held to maturity (or ditto for a 10-year holding period for a 10-year Treasury).

With a flat yield curve, you have a broader distribution of expected returns with the fund/ladder, but with an expected return that is no higher than that of the individual security held to maturity. Viewed in isolation, I would favor holding the alternative with the same expected return but less uncertainty (close to none) in the realized return.

I understand, though, that you prefer the choice that you believe is more likely to continue to be more negatively correlated with stocks in bad times. The potential negative correlation is higher with higher duration, and the duration of the individual Treasury declines over time.

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Re: Why choose intermediate term treasury at this time?

Post by Doc » Mon Feb 11, 2019 1:47 pm

@Kevin

Yeh, I'm still saying that the 20 bps may not still be applicable. I didn't put a lot of faith in Larry's email. Maybe I should stop by his house and ask him. :D
Kevin M wrote:
Mon Feb 11, 2019 1:02 pm
The main point is that there is significant uncertainty in the capital return component of a bond not held to maturity, while there is much less uncertainty in the total return of a bond held to maturity.
So what. If the curve stays relatively static you harvest the roll yield and if it flattens you just hold to maturity and only get what your were promised when you bought it.
Kevin M wrote:
Mon Feb 11, 2019 1:02 pm
I understand, though, that you prefer the choice that you believe is more likely to continue to be more negatively correlated with stocks in bad times. The potential negative correlation is higher with higher duration, and the duration of the individual Treasury declines over time.
I belive that nominal Treasuries will be negatively correlated with equities in bad times. And yes the longer maturities are likely to give you more bang for the buck. But you also take on more term risk. As you keep noting the current yield curve is very flat. I don't know if that will affect the negative correlation aspects. Probably will. I've been shortening my duration over the last year or so but only by not rolling notes or by selling longer term funds when I need cash while at the same time TLH.

Question: I used to have a source that showed the yield curve graph where you can compare two dates. I thought it was on the Treasury"s site but can no longer find it. Did they take it off or was it somewhere else? I can do it myself but the online graph was very convenient.
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Re: Why choose intermediate term treasury at this time?

Post by pascalwager » Mon Feb 11, 2019 2:22 pm

Doc wrote:
Mon Feb 11, 2019 9:56 am
pascalwager wrote:
Sun Feb 10, 2019 10:06 pm
The 20 bps criterion is arbitary and comes from DFA and their variable maturity approach to setting bond fund maturity (as per Gene Fama). In his bond book, Larry recommends using bonds for ballast in the accumulation stage and then, perhaps, stretching for yield in retirement--but in keeping with the 20 bps criterion
From memory Swedroe's bond book was published in ~2006. I have not been able to find a similar type recommendation based on the last ten year's yield curve.
Yes, his book was 2006. This thread, of course, is based on using Treasuries. For overall productivity, Larry may still recommend using CDs for higher yields. But some, like myself, may still prefer the convenience of a Treasury fund, which he allowed for in the book.
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Re: Why choose intermediate term treasury at this time?

Post by Kevin M » Mon Feb 11, 2019 2:25 pm

Doc wrote:
Mon Feb 11, 2019 1:47 pm
Yeh, I'm still saying that the 20 bps may not still be applicable. I didn't put a lot of faith in Larry's email. Maybe I should stop by his house and ask him. :D
And how would him saying it to you face to face being any more credible than him saying it to me in an email, without saying that I couldn't share what he said on this forum? :confused

More importantly, I'm interested to hear why you think the yield curve of late should make a difference, given that I showed it's not much different than the yield curve leading up to 2006 (at least looking at the 10-2 as the measure).
Doc wrote:
Mon Feb 11, 2019 1:47 pm
Question: I used to have a source that showed the yield curve graph where you can compare two dates. I thought it was on the Treasury"s site but can no longer find it. Did they take it off or was it somewhere else? I can do it myself but the online graph was very convenient.
Are you talking about this: https://stockcharts.com/freecharts/yieldcurve.php ? Click in the right pane (S&P 500 chart) to select a date, and the yield curve in the left pane switches to that date. Note that yield curve shape in 2006 looked pretty similar to today, just higher yields, but perhaps flatter, and inverted at the long end in 2006.

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Re: Why choose intermediate term treasury at this time?

Post by hudson » Mon Feb 11, 2019 2:39 pm

Thanks Kevin for your detailed reply! (Thanks again!)
A few days ago, I couldn't explain SEC yield. I read up on it, read your old contributions and the new ones. I'm getting there!
You said something like...theoretically distribution yield will gradually decline to the SEC Yield...and current distribution yield is the best predictor of next month's distribution. I don't know that everyone understands that. I think that many think that the SEC yield is the distribution yield.

For my situation, I only plan on holding say VWIUX until I find something better. I may hold it forever. I may not. If it was paying the SEC yield (2.38%), I would dump it. January's distribution was 2.9%.

Back to the OP...thanks for asking your questions!!
If I was the OP/Topic Author, I would go with SCHR unless I could buy VFIUX. SCHR is paying 33 basis points more than SCHO....now.
The SEC yield is helpful, but I would take those basis points. Of course the OP should watch the monthly distributions.

SCHR (Intermed. Treas. ETF)
SEC is 2.52
TTM is 2.11

SCHO (Short Term Treas. ETF)
SEC is 2.50
TTM is 1.78

Van Intermed Treas Admir VFIUX
SEC 2.57
TTM 2.48

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Re: Why choose intermediate term treasury at this time?

Post by Doc » Mon Feb 11, 2019 3:09 pm

Regarding shifting maturity approach AKA Riding the Yield curve:
Swedroe wrote:Dimensional fund Advisors (DFA) which has successfully used this approach since 1983 ... two caveats ... The second is that because longer-maturity bonds have more price risk, DFA imposes an arbitrary rule that a longer maturity must provide at least twenty basis points per annum ... in order to extend maturity.
"Winning Bond Strategy" p 76

Three points:

1) Arbitrary

2) This book was published in March 2006.

3) I wonder if the 20 bps was including the roll yield not just the YTM of the notes themselves. :idea: The context of Swedroe's remarks were in a discussion for a shifting maturity (riding the yield curve) approach.
Kevin M wrote:
Mon Feb 11, 2019 2:25 pm
Are you talking about this: https://stockcharts.com/freecharts/yieldcurve.php ?
No that's not it. But that's fast and interesting. I'm looking for something akin to this but with only two dates.

Image
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Re: Why choose intermediate term treasury at this time?

Post by Johnnie » Mon Feb 11, 2019 5:05 pm

I am ever so happy right now in VFIRX, Vanguard Short-Term Treasury Fund, with a duration of about two years.

I do worry a tiny, tiny bit about this seeming to be a "crowded trade" these days, suggesting that Mr. Market might have a rise in intermediate term rates in store for the near future.

But then I remember something else Larry said about bonds, along the lines of this part of your portfolio is about safety, so don't get cute with it. He was referring those who got bit in 2008 for chasing yield with below-investment grade corporates and the like, and that there is nothing wrong with using something like - VFIRX: All treasuries, two-year duration.

It's the sleep-like-a-baby part of my portfolio.
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Re: Why choose intermediate term treasury at this time?

Post by hudson » Mon Feb 11, 2019 5:12 pm

Johnnie wrote:
Mon Feb 11, 2019 5:05 pm
I am ever so happy right now in VFIRX, Vanguard Short-Term Treasury Fund, with a duration of about two years.
VFIRX: EXP RATIO: .10
SEC 2.51
Distrib Jan. 2.49%
Vang Risk Potential 1
Avg. Duration 2.2 years
I know that you have that in a tax advantaged account.

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Re: Why choose intermediate term treasury at this time?

Post by pascalwager » Mon Feb 11, 2019 6:30 pm

Doc wrote:
Mon Feb 11, 2019 12:02 pm
michaeljmroger wrote:
Mon Feb 11, 2019 10:05 am
Since nobody knows anything about the future, I'd decide on the duration depending on my time horizon. If you're investing for the long term, I'd definitely go with SCHR.
For similar reasoning about the unknown future I model my FI portfolio on the Barclays Capital U.S. Intermediate Government/Credit Bond Index based on ideas presented in Swedroe's "Winning Bond strategy".

Since we don't know the future I don't know when I am going to die and therefore my time horizon is about as unknown as the future Dow.

That said you seem to be basing your bond portfolio on future needs for spending not for its interaction with the equity portion of your portfolio. That's not a universal idea.
Based on Larry's bond book, I don't think he would consider the Vg Intermediate Bond Index fund, for example, to be optimal. The credit debt maturities are too long (high std dev) and the overall fund maturity is a couple of years beyond the sweet spot.

One could probably combine the Vg ST Corp, IT Treas, and ST Treas funds to produce an optimal bond portfolio. I'm a retiree and might do this if I needed to use my bond funds for income; but I don't, so I just stick with ST funds, or even MMFs right now. And the Vg ST funds are not really ST. I need to barbell them with a MMF to get down into the 1-2 year range.

Larry's book defines MMFs as savings (not investments), short-term as 1-2 years, and intermediate as 5-10 years (average maturity, not duration). Short-term is for accumulators, or retirees, say, with a pension. Intermediate is for retirees who need to take more risk and stretch a bit, but still shouldn't stretch past the sweet spot (where the yield curve begins to flatten).

Do I consider my stock and bond funds as a combined single, larger entity? As a retiree, not so much any more, I guess. In fact, right now I've got two spreadsheet versions. One is grouped by accounts and the other by baskets (not buckets).
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Re: Why choose intermediate term treasury at this time?

Post by Kevin M » Mon Feb 11, 2019 6:31 pm

hudson wrote:
Mon Feb 11, 2019 5:12 pm
Johnnie wrote:
Mon Feb 11, 2019 5:05 pm
I am ever so happy right now in VFIRX, Vanguard Short-Term Treasury Fund, with a duration of about two years.
VFIRX: EXP RATIO: .10
SEC 2.51
Distrib Jan. 2.49%
Vang Risk Potential 1
Avg. Duration 2.2 years
I know that you have that in a tax advantaged account.
It's a reasonable choice to consider for a taxable account, especially if you pay state income tax, since the taxable-equivalent yield (TEY) is higher than the SEC yield due to the state income tax exemption.

I have a slight preference for the index version (VSBSX), with about the same yield but slightly lower duration, but I sold most of mine recently, as well as a bunch of my individual short-term Treasuries, to buy more of the Flexible Rising Rate CD, which I think I mentioned earlier in this thread.

With the flattish yield curve, you don't get much higher yield with a short-term Treasury fund than with Treasury money market fund--about 10 basis points of extra yield per extra year of maturity if you go by SEC yield. It's even less than that in reality, since SEC yield is a lagging 30-day average, and currently you only get 4 basis points more for a 2-year Treasury than for a 1-month Treasury.

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Re: Why choose intermediate term treasury at this time?

Post by pascalwager » Tue Feb 12, 2019 3:11 am

Today I exchanged all of my Treasury bond funds into money market funds--mostly the safer Treasury type but also Prime where necessary. If the yield spreads improve sufficiently in the future, then I'll easily move most of it into short-term Treasury funds--possibly bar-belling with money markets to bring overall duration into the 1 to 2 years range. In one account with no Treasury funds, I would need to barbell Prime MM with 18% TBM (or use the global bond index fund) to get an overall maturity of, say, 1.5 years.

So, now I'm at 52% stocks and 48% cash with zero bonds. Every day I'll get to watch overall ~$70 trickle reliably into these new cash reserves with no fear of price drops. This is actually similar to my accumulation period fixed-income investing when I had two DFA short-term bond funds for two accounts over 17 years: a 1-year and a 2-year fund.

I don't expect to ever exceed 2-years bond fund maturity again.
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Re: Why choose intermediate term treasury at this time?

Post by Longtermgrowth » Tue Feb 12, 2019 3:49 am

I have been pondering the same question, but with true total bond market funds: IUSB (iShares Core Total USD Bond Market ETF) and ISTB (iShares Core 1-5 Year USD Bond ETF), which are intermediate and short term funds that hold everything including high yield at market weighting, currently only 16bp apart in SEC yield.

When I buy things, I don't want to mess with selling them trying to guess where interest rates will be. 30 years from now, is that short term fund going to look as good in total return? Who knows where interest rates and longer maturity bonds will go from here. There's a reason the general Boglehead advice is to buy an intermediate bond fund with longer timeframe fixed income investments, right?

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Re: Why choose intermediate term treasury at this time?

Post by hudson » Tue Feb 12, 2019 5:51 am

Hudson: I know that you have that in a tax advantaged account.
Kevin M: It's a reasonable choice to consider for a taxable account, especially if you pay state income tax, since the taxable-equivalent yield (TEY) is higher than the SEC yield due to the state income tax exemption.

Thanks Kevin! I'm learning!

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Re: Why choose intermediate term treasury at this time?

Post by hudson » Tue Feb 12, 2019 6:00 am

pascalwager wrote:
Tue Feb 12, 2019 3:11 am
Today I exchanged all of my Treasury bond funds into money market funds--mostly the safer Treasury type but also Prime where necessary.
So, now I'm at 52% stocks and 48% cash with zero bonds.
I don't expect to ever exceed 2-years bond fund maturity again.
Maybe Vang Fed MM...VMFXX Expense .11, 49% treasuries, 35% Gov't Obligations, 17% Repurchase Agreements, Jan. Distribution 2.31%, SEC 2.32%, Vang. Risk Potential 1?
I think that's Vang's settlement fund.
Maybe that fund ties current inflation or at least your personal inflation rate
It sounds like a solution that W. Bernstein would recommend.
Very safe!
You keep it in taxable and don't pay state taxes?

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Re: Why choose intermediate term treasury at this time?

Post by jeffyscott » Tue Feb 12, 2019 7:29 am

Doc wrote:
Mon Feb 11, 2019 1:47 pm
Question: I used to have a source that showed the yield curve graph where you can compare two dates. I thought it was on the Treasury"s site but can no longer find it. Did they take it off or was it somewhere else? I can do it myself but the online graph was very convenient.
Was it the "living yield curve"? That's one I remember, search found references to it but it seems to be gone. I did find this animation while looking for it, though: https://lairdresearch.com/?p=119
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Re: Why choose intermediate term treasury at this time?

Post by dbr » Tue Feb 12, 2019 9:23 am

Here is a link that might be what you mean: https://stockcharts.com/freecharts/yieldcurve.php

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Re: Why choose intermediate term treasury at this time?

Post by Doc » Tue Feb 12, 2019 10:56 am

pascalwager wrote:
Mon Feb 11, 2019 6:30 pm
Based on Larry's bond book, I don't think he would consider the Vg Intermediate Bond Index fund, for example, to be optimal. The credit debt maturities are too long (high std dev) and the overall fund maturity is a couple of years beyond the sweet spot.
Right. But I don't use the VG fund. It is a 5-10 index. I use iShares Intermediate Government/Credit Bond ETF GVI which is a 1-10 index as my bogey. But I even shorten the duration of my portfolio from that by about a year. (My FI is split between taxable and tax advantaged so there are several different assets that are placed for tax efficiency.)

Here's what it looks like.

Image

I'm shorter term by intent and overweight Treasuries as a temporary position given current Washington DC events or lack thereof.
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Re: Why choose intermediate term treasury at this time?

Post by Doc » Tue Feb 12, 2019 11:02 am

dbr wrote:
Tue Feb 12, 2019 9:23 am
Here is a link that might be what you mean: https://stockcharts.com/freecharts/yieldcurve.php
No that's not it but it helps. The one I used allowed two times on a single graph for comparisons. I think it was a Treasury related site.

I have two links in my "favorites" to yield curve tables on Treasury.gov but I think one of them used to link to a graph. :?
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Re: Why choose intermediate term treasury at this time?

Post by pascalwager » Tue Feb 12, 2019 1:00 pm

hudson wrote:
Tue Feb 12, 2019 6:00 am
pascalwager wrote:
Tue Feb 12, 2019 3:11 am
Today I exchanged all of my Treasury bond funds into money market funds--mostly the safer Treasury type but also Prime where necessary.
So, now I'm at 52% stocks and 48% cash with zero bonds.
I don't expect to ever exceed 2-years bond fund maturity again.
Maybe Vang Fed MM...VMFXX Expense .11, 49% treasuries, 35% Gov't Obligations, 17% Repurchase Agreements, Jan. Distribution 2.31%, SEC 2.32%, Vang. Risk Potential 1?
I think that's Vang's settlement fund.
Maybe that fund ties current inflation or at least your personal inflation rate
It sounds like a solution that W. Bernstein would recommend.
Very safe!
You keep it in taxable and don't pay state taxes?
I have three MMFs: Vg Treasury MMF in taxable and Rollover IRA, and a Vg Prime-type in a VA. I do pay high state taxes. Note: The Vg Treasury MMF is the pre-eminent MMF among all MMFs as it's composed of 100% Treasury securities and is low-cost. (I have not the slightest interest in using the Vg Federal MMF.)

I don't expect to ever use the Vg IT Treasury Bond Fund again myself, but it does have a very modest and reasonable maturity right now for retirees that need more bond income (when yields increase) and conforms to the recommendations in Larry's book for that kind of investor.
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Re: Why choose intermediate term treasury at this time?

Post by pascalwager » Tue Feb 12, 2019 1:49 pm

Johnnie wrote:
Mon Feb 11, 2019 5:05 pm
I am ever so happy right now in VFIRX, Vanguard Short-Term Treasury Fund, with a duration of about two years.

I do worry a tiny, tiny bit about this seeming to be a "crowded trade" these days, suggesting that Mr. Market might have a rise in intermediate term rates in store for the near future.

But then I remember something else Larry said about bonds, along the lines of this part of your portfolio is about safety, so don't get cute with it. He was referring those who got bit in 2008 for chasing yield with below-investment grade corporates and the like, and that there is nothing wrong with using something like - VFIRX: All treasuries, two-year duration.

It's the sleep-like-a-baby part of my portfolio.
Note: the yield curve spread between 2 months and 2 years is only 4 bps today.
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Re: Why choose intermediate term treasury at this time?

Post by Kevin M » Tue Feb 12, 2019 2:15 pm

hudson wrote:
Tue Feb 12, 2019 5:51 am
Hudson: I know that you have that in a tax advantaged account.
Kevin M: It's a reasonable choice to consider for a taxable account, especially if you pay state income tax, since the taxable-equivalent yield (TEY) is higher than the SEC yield due to the state income tax exemption.

Thanks Kevin! I'm learning!
You're welcome.

Note that the short-term Treasury funds can be competitive with something like Limited-Term Tax Exempt for those with high state income tax rates and not super high federal rates. For this reason, a few months ago I exchanged from Lmtd-Term TE (VMLUX) to ST Treasury Index (VSBSX), which at the time had a higher TEY for me with lower duration, and I harvested a tax loss to boot.

VSBSX still has a higher TEY for me, at 2.82% (SEC yield = 2.51%), with VMLUX at 2.77% TEY (SEC = 1.96%). Duration of VSBSX is 1.9 years, while that of VMLUX is 2.6 years. So VSBSX has less credit risk, less term risk, and higher TEY. What's not to like if you're looking for something with 2-3 year duration in a taxable account (at least at my marginal tax rates of 27% fed and 8% state)?

At fed 37% and state 9.3%, TEY of VSBSX would be 2.94% with VMLUX at 3.31%, so then you'd want to think about whether or not the extra credit risk and term risk are worth the extra 36 basis points of TEY (about 20 basis points of extra after-tax yield).

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Re: Why choose intermediate term treasury at this time?

Post by Kevin M » Tue Feb 12, 2019 2:28 pm

hudson wrote:
Tue Feb 12, 2019 6:00 am
pascalwager wrote:
Tue Feb 12, 2019 3:11 am
Today I exchanged all of my Treasury bond funds into money market funds--mostly the safer Treasury type but also Prime where necessary.
So, now I'm at 52% stocks and 48% cash with zero bonds.
I don't expect to ever exceed 2-years bond fund maturity again.
Maybe Vang Fed MM...VMFXX Expense .11, 49% treasuries, 35% Gov't Obligations, 17% Repurchase Agreements, Jan. Distribution 2.31%, SEC 2.32%, Vang. Risk Potential 1?
I think that's Vang's settlement fund.
Maybe that fund ties current inflation or at least your personal inflation rate
It sounds like a solution that W. Bernstein would recommend.
Very safe!
You keep it in taxable and don't pay state taxes?
Fed MM would be my second choice for a taxable account, after Treasury MM (at my tax rates). For 2018, about 78% of income was from US government obligations (state tax exempt), and it met the >50% of assets in US government obligations threshold for CA (and two other states). So I'm using 78% as an estimate for state tax exemption for 2019.

For me TEY of Fed MM at 2.32% SEC yield is 2.54%. It's a bit shy of the 2.62% Treasury MM TEY (SEC 2.33%), but a bit higher than Prime SEC yield of 2.47%. The safety is between Prime and Treasury, so Treasury MM still is the obvious choice if you have $50K for the initial investment (at tax rates similar to mine).

All of these MM funds beat the TEYs for me of the tax-exempt MM funds, with the national TE MM fund at 2.08% TEY for me and the CA MM fund at 2.03% TEY for me.

In my IRA accounts, I exchange from Fed MM to Prime MM whenever I notice that I have $100 or more in Fed MM (from dividends). In taxable I'm OK with money sitting in Fed MM for awhile, and actually have started to use it as a checking account to pay my bills (with a Vanguard Advantage account), with Treasury MM fund serving as the savings account.

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Re: Why choose intermediate term treasury at this time?

Post by hudson » Tue Feb 12, 2019 7:36 pm

If I'm reading this correctly pascalwager and Kevin M like short term or very short term treasuries
They work well with high state tax states especially....because one doesn't pay state tax on treasuries.
pascalwager likes
Vang. Treasury MMF...maybe that is Prime Money Market...VMMXX?...I don't see a Treasury MM fund?
Vang Intermediate treasury...not for pascalwager but he recommends it for those who need more yield...VFIUX

Kevin M likes
Treasury MM 1st...Prime? I don't see a treasury MM fund?
Federal MM 2d VMFXX
Vang. Short Term Treasuries...VFIRX
Limited Term Tax Exempt...VMLUX
Vanguard Short-Term Treasury Index Fund Admiral Shares (VSBSX)

Both like the writings and advice of Larry Swedroe...me too!

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Re: Why choose intermediate term treasury at this time?

Post by pascalwager » Tue Feb 12, 2019 9:12 pm

hudson wrote:
Tue Feb 12, 2019 7:36 pm
If I'm reading this correctly pascalwager and Kevin M like short term or very short term treasuries
They work well with high state tax states especially....because one doesn't pay state tax on treasuries.
pascalwager likes
Vang. Treasury MMF...maybe that is Prime Money Market...VMMXX?...I don't see a Treasury MM fund?
Vang Intermediate treasury...not for pascalwager but he recommends it for those who need more yield...VFIUX

Kevin M likes
Treasury MM 1st...Prime? I don't see a treasury MM fund?
Federal MM 2d VMFXX
Vang. Short Term Treasuries...VFIRX
Limited Term Tax Exempt...VMLUX
Vanguard Short-Term Treasury Index Fund Admiral Shares (VSBSX)

Both like the writings and advice of Larry Swedroe...me too!
To see the Vg Treasury MMF, set the filter to show $50k minimum funds.

I'm only (reluctantly) using Prime MMF in one account because the Treasury MMF isn't available for that account. The Treasury MMF is safer.

I don't know why anyone would want to use the Treasury bond funds right now as opposed to the Treasury MMF. The bond fund yields are currently too low, at least by the 20 bps criterion. Later, with higher yields, risk-taking retirees could move into the intermediate fund and younger accumulators could move into the short-term fund. I would also move into the short-term fund as a retiree with a pension who doesn't need to take interest-rate risk.

But Larry cautions people to remember that higher maturities mean higher correlations with stocks.
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Re: Why choose intermediate term treasury at this time?

Post by hudson » Tue Feb 12, 2019 9:40 pm

pascalwager wrote:
Tue Feb 12, 2019 9:12 pm

To see the Vg Treasury MMF, set the filter to show $50k minimum funds.

But Larry cautions people to remember that higher maturities mean higher correlations with stocks.
I see it now; I heard about the filter, but never really looked for it...THANKS!
VUSXX...Treas. MMF, avg maturity 44 days, Jan. distribution 2.31%, 100% treasury bills, expense .09...very safe!

I agree with Larry...I need to go through his book again.

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Re: Why choose intermediate term treasury at this time?

Post by Doc » Wed Feb 13, 2019 8:39 am

pascalwager wrote:
Tue Feb 12, 2019 9:12 pm
But Larry cautions people to remember that higher maturities mean higher correlations with stocks.
I don't recall this. I thought it was generally accepted that long Treasuries gave the most negative correlation with stocks during stock market declines.

Longer term corporates correlation with stocks is a different matter.
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Re: Why choose intermediate term treasury at this time?

Post by pascalwager » Wed Feb 13, 2019 1:01 pm

Doc wrote:
Wed Feb 13, 2019 8:39 am
pascalwager wrote:
Tue Feb 12, 2019 9:12 pm
But Larry cautions people to remember that higher maturities mean higher correlations with stocks.
I don't recall this. I thought it was generally accepted that long Treasuries gave the most negative correlation with stocks during stock market declines.

Longer term corporates correlation with stocks is a different matter.
Treasury maturities beyond one-year begin to show increasing correlation with US stocks. Any corporate bonds added to a bond portfolio increases the correlation of the bond portfolio with stocks.

See Chapter 4 (written prior to 2008).
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Re: Why choose intermediate term treasury at this time?

Post by Doc » Wed Feb 13, 2019 1:33 pm

pascalwager wrote:
Wed Feb 13, 2019 1:01 pm
Doc wrote:
Wed Feb 13, 2019 8:39 am
pascalwager wrote:
Tue Feb 12, 2019 9:12 pm
But Larry cautions people to remember that higher maturities mean higher correlations with stocks.
I don't recall this. I thought it was generally accepted that long Treasuries gave the most negative correlation with stocks during stock market declines.

Longer term corporates correlation with stocks is a different matter.
Treasury maturities beyond one-year begin to show increasing correlation with US stocks. Any corporate bonds added to a bond portfolio increases the correlation of the bond portfolio with stocks.

See Chapter 4 (written prior to 2008).
Thanks.
Swedroe wrote:In order for the safety net to be effective, the assets it holds must have low correlation with the risky portion of the portfolio. ... Also, unfortunately the higher correlation with the equity portion can appear at just the wrong time.
"Winning Bond Strategy." p71 published March 2006

There is then a chart that shows annual correlation data. (DFA data again.) But it's annual data. When the bears show up the negative correlation of Treasuries with equities shows up in the flight to quality phenomenon but it rapidly returns to normal in a relatively short period of time which is not likely to show up in annual correlations. Think 4th quarter 2008 and December 2018.

Maybe it was Hempen that wrote this chapter. :P

Ironically I just reread part of this chapter a few days ago but I started reading on p73 - two pages after the quote.
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.

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