US Bonds in free fall

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stocknoob4111
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US Bonds in free fall

Post by stocknoob4111 » Thu Nov 07, 2019 1:07 pm

Since this type of thread does not exist here it is now...

All the strong recent gains that Bonds have seen seem to be evaporating as we speak. BIV (Vanguard Intermediate Bond ETF) is DOWN 1.6% month to date so far and still dropping.

Relative to the annual average expected return for the asset class this almost qualifies as a "crash" in my opinion since the drop in just 10 days represents 76% of the SEC yield of the ETF/Fund.

Do we see more downside for Bonds from this point? Did you take profits (market timing I know)? If you did not take profits what do you intend to do if your bonds have negative real yields and you are losing money.

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Ketawa
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Re: US Bonds in free fall

Post by Ketawa » Thu Nov 07, 2019 1:15 pm

stocknoob4111 wrote:
Thu Nov 07, 2019 1:07 pm
Do we see more downside for Bonds from this point? Did you take profits (market timing I know)? If you did not take profits what do you intend to do if your bonds have negative real yields and you are losing money.
LTPZ has also been falling, indicating that real yields are higher now. People who held bonds and suffered recent losses should be happy to hold them at higher yields.

Personally, my fixed income is 100% G Fund (and some prepaid cards earning more). However, I am considering some changes to my portfolio: Extend Duration from Zero (G Fund) to Intermediate Term (G Fund/LT Treasury ETF)?
:sharebeer

aristotelian
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Re: US Bonds in free fall

Post by aristotelian » Thu Nov 07, 2019 1:29 pm

I had bought some ST Treasury as protection against interest rates rising in late 2018-early 2019. At the time it seemed like yields had dropped a lot and couldn't possibly drop further! Thinking about extending the duration of those and moving back into Intermediate where I should have been all along. Fortunately it is just a small amount in my HSA so either way it will be a relatively cheap reminder that I suck at timing the market.

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Re: US Bonds in free fall

Post by stocknoob4111 » Thu Nov 07, 2019 1:42 pm

I am at a loss why the 10 year Treasury is heading on it's way to breach 2% when the German 10 year Bund is currently yielding -0.24%. How exactly can this staggering divergence be sustainable?

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Re: US Bonds in free fall

Post by harvestbook » Thu Nov 07, 2019 1:45 pm

I'd like to buy some more bonds but I at least want them to keep pace with inflation, so it feels less like a crash and more like getting on the track back to reality.
I'm not smart enough to know, and I can't afford to guess.

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Bluce
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Re: US Bonds in free fall

Post by Bluce » Thu Nov 07, 2019 2:08 pm

I've added cash to several bond ETFs this morning including TLH, the 10-20 year Treasury fund.

And I will add to a bond mutual fund tonight also.

My crystal ball is in the shop being repaired, so I have no idea what the future will bring -- so it's all just a big crap shoot.

The ten-year Treasury:

Image

dbr
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Re: US Bonds in free fall

Post by dbr » Thu Nov 07, 2019 2:16 pm

Bonds are not in free fall.

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Re: US Bonds in free fall

Post by aristotelian » Thu Nov 07, 2019 2:22 pm

stocknoob4111 wrote:
Thu Nov 07, 2019 1:42 pm
I am at a loss why the 10 year Treasury is heading on it's way to breach 2% when the German 10 year Bund is currently yielding -0.24%. How exactly can this staggering divergence be sustainable?
Alternatively, one might ask how the Germans can get away with negative interest rates when you can get 2% risk free from the US Treasury. Surely those negative interest rates cannot be sustainable!

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Re: US Bonds in free fall

Post by MotoTrojan » Thu Nov 07, 2019 2:35 pm

stocknoob4111 wrote:
Thu Nov 07, 2019 1:42 pm
I am at a loss why the 10 year Treasury is heading on it's way to breach 2% when the German 10 year Bund is currently yielding -0.24%. How exactly can this staggering divergence be sustainable?
Why? Our economy is doing better. It’s not like a German can simply invest their currency in treasuries and make over 2% more.

I’m holding EDV so these rates are moving my NAV quite a bit, but it’s a long road ahead.

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Re: US Bonds in free fall

Post by dbr » Thu Nov 07, 2019 2:44 pm

MotoTrojan wrote:
Thu Nov 07, 2019 2:35 pm
stocknoob4111 wrote:
Thu Nov 07, 2019 1:42 pm
I am at a loss why the 10 year Treasury is heading on it's way to breach 2% when the German 10 year Bund is currently yielding -0.24%. How exactly can this staggering divergence be sustainable?
Why? Our economy is doing better. It’s not like a German can simply invest their currency in treasuries and make over 2% more.

Here is a listing of foreign holdings of US Treasuries led by Japan with holdings of over a trillion dollars and with total foreign holdings of over four trillion dollars: https://ticdata.treasury.gov/Publish/mfh.txt

and an article about European investment in US debt: https://seekingalpha.com/article/426401 ... y-american

I don't know anything about what causes the market to accept different interest rates on bonds of different countries.

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Re: US Bonds in free fall

Post by 305pelusa » Thu Nov 07, 2019 2:50 pm

dbr wrote:
Thu Nov 07, 2019 2:44 pm

I don't know anything about what causes the market to accept different interest rates on bonds of different countries.
I thought it had to do with their currency. In other words, there's an expectation that the dollar will depreciate/inflate vs the Euro (EU deflation) that accounts for it.

So if a German invested in HEDGED US bonds, their returns would be around what they could get in UNHEDGED German bonds.

That's what I thought any ways

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Re: US Bonds in free fall

Post by MarkRoulo » Thu Nov 07, 2019 2:54 pm

stocknoob4111 wrote:
Thu Nov 07, 2019 1:42 pm
I am at a loss why the 10 year Treasury is heading on it's way to breach 2% when the German 10 year Bund is currently yielding -0.24%. How exactly can this staggering divergence be sustainable?
November 2019 Euro/Dollar futures seem to be around 1.10-1.11
December 2020 Euro/Dollar futures seem to be around 1.13

Emphasis on "around" in both cases.

That is about a 2% - 3% difference so Euro vs Dollar interest rates being also 2% - 3% different is consistent.

Short version: The "markets" expect the US dollar to lose about 2% - 3% vs the Euro over the next year.

The rates could have been 6% for the US and 4% for Germany. Or 2% and 0%. Or ...

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Re: US Bonds in free fall

Post by MotoTrojan » Thu Nov 07, 2019 4:00 pm

305pelusa wrote:
Thu Nov 07, 2019 2:50 pm
dbr wrote:
Thu Nov 07, 2019 2:44 pm

I don't know anything about what causes the market to accept different interest rates on bonds of different countries.
I thought it had to do with their currency. In other words, there's an expectation that the dollar will depreciate/inflate vs the Euro (EU deflation) that accounts for it.

So if a German invested in HEDGED US bonds, their returns would be around what they could get in UNHEDGED German bonds.

That's what I thought any ways
Exactly. Sure they may invest in it for trading/hedging purposes but the currency rates will provide similar real returns in either case, once withdrawn in native currency.

Same reason I can't go out and invest in Turkish bonds that are yielding well into the double-digits and crush the S&P500.

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Phineas J. Whoopee
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Re: US Bonds in free fall

Post by Phineas J. Whoopee » Thu Nov 07, 2019 4:12 pm

Accelerating at 9.8 meters per second per second? I hardly think a minor upward yield adjustment over one market day is properly described as free fall.
PJW

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Re: US Bonds in free fall

Post by stocknoob4111 » Thu Nov 07, 2019 4:27 pm

Phineas J. Whoopee wrote:
Thu Nov 07, 2019 4:12 pm
I hardly think a minor upward yield adjustment over one market day is properly described as free fall.
PJW
BIV has dropped 1% in the last 2 days... that amounts to 50% of it's SEC yield. I would definitely call that free fall... it's all relative to the asset class' typical performance. 1% drop for Bonds is huge when they barely have any real yield.

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Re: US Bonds in free fall

Post by Stinky » Thu Nov 07, 2019 4:29 pm

stocknoob4111 wrote:
Thu Nov 07, 2019 1:07 pm
Since this type of thread does not exist here it is now...

All the strong recent gains that Bonds have seen seem to be evaporating as we speak. BIV (Vanguard Intermediate Bond ETF) is DOWN 1.6% month to date so far and still dropping.

Relative to the annual average expected return for the asset class this almost qualifies as a "crash" in my opinion since the drop in just 10 days represents 76% of the SEC yield of the ETF/Fund.

Do we see more downside for Bonds from this point? Did you take profits (market timing I know)? If you did not take profits what do you intend to do if your bonds have negative real yields and you are losing money.
Will you also start up a "bonds are soaring to the heavens" thread when that's the case? :happy
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Re: US Bonds in free fall

Post by PolarInvest » Thu Nov 07, 2019 4:37 pm

stocknoob4111 wrote:
Thu Nov 07, 2019 4:27 pm
Do we see more downside for Bonds from this point? Did you take profits (market timing I know)? If you did not take profits what do you intend to do if your bonds have negative real yields and you are losing money.
I don't think that you understand bonds. Bonds have positive real yields right now and they are getting more positive. If yields on long-term bonds go down enough that there are instead negative real yields, I would have made a boatload of money on them at that point.

If you are a long-term investor, you should be cheering yield increases. If long-term US rates ever approached zero or went negative, I would be worse off in terms of my expected long-term return. I hold 15% of my portfolio in EDV so I at least get some compensation in the short-term if that happens.

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Re: US Bonds in free fall

Post by billthecat » Thu Nov 07, 2019 4:47 pm

Sorry, it’s my fault. I started buying total bond.
We cannot direct the winds but we can adjust our sails.

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Re: US Bonds in free fall

Post by GoldenFinch » Thu Nov 07, 2019 4:53 pm

Stinky wrote:
Thu Nov 07, 2019 4:29 pm
stocknoob4111 wrote:
Thu Nov 07, 2019 1:07 pm
Since this type of thread does not exist here it is now...

All the strong recent gains that Bonds have seen seem to be evaporating as we speak. BIV (Vanguard Intermediate Bond ETF) is DOWN 1.6% month to date so far and still dropping.

Relative to the annual average expected return for the asset class this almost qualifies as a "crash" in my opinion since the drop in just 10 days represents 76% of the SEC yield of the ETF/Fund.

Do we see more downside for Bonds from this point? Did you take profits (market timing I know)? If you did not take profits what do you intend to do if your bonds have negative real yields and you are losing money.
Will you also start up a "bonds are soaring to the heavens" thread when that's the case? :happy
The only problem I see for the staying power of this thread is that bonds are a bit boring, even in free fall or soar mode. :happy

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Re: US Bonds in free fall

Post by MotoTrojan » Thu Nov 07, 2019 4:56 pm

GoldenFinch wrote:
Thu Nov 07, 2019 4:53 pm
Stinky wrote:
Thu Nov 07, 2019 4:29 pm
stocknoob4111 wrote:
Thu Nov 07, 2019 1:07 pm
Since this type of thread does not exist here it is now...

All the strong recent gains that Bonds have seen seem to be evaporating as we speak. BIV (Vanguard Intermediate Bond ETF) is DOWN 1.6% month to date so far and still dropping.

Relative to the annual average expected return for the asset class this almost qualifies as a "crash" in my opinion since the drop in just 10 days represents 76% of the SEC yield of the ETF/Fund.

Do we see more downside for Bonds from this point? Did you take profits (market timing I know)? If you did not take profits what do you intend to do if your bonds have negative real yields and you are losing money.
Will you also start up a "bonds are soaring to the heavens" thread when that's the case? :happy
The only problem I see for the staying power of this thread is that bonds are a bit boring, even in free fall or soar mode. :happy
You are holding the wrong funds then... EDV and especially TMF are anything but boring.

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Re: US Bonds in free fall

Post by DonIce » Thu Nov 07, 2019 5:03 pm

MotoTrojan wrote:
Thu Nov 07, 2019 4:00 pm
Exactly. Sure they may invest in it for trading/hedging purposes but the currency rates will provide similar real returns in either case, once withdrawn in native currency.
Expected return.. but reality rarely matches expectations. The US has had higher rates than Germany for the last 10 years, and yet the US dollar has actually gained value relative to the Euro on top of that too.

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Re: US Bonds in free fall

Post by GoldenFinch » Thu Nov 07, 2019 5:08 pm

MotoTrojan wrote:
Thu Nov 07, 2019 4:56 pm
GoldenFinch wrote:
Thu Nov 07, 2019 4:53 pm
Stinky wrote:
Thu Nov 07, 2019 4:29 pm
stocknoob4111 wrote:
Thu Nov 07, 2019 1:07 pm
Since this type of thread does not exist here it is now...

All the strong recent gains that Bonds have seen seem to be evaporating as we speak. BIV (Vanguard Intermediate Bond ETF) is DOWN 1.6% month to date so far and still dropping.

Relative to the annual average expected return for the asset class this almost qualifies as a "crash" in my opinion since the drop in just 10 days represents 76% of the SEC yield of the ETF/Fund.

Do we see more downside for Bonds from this point? Did you take profits (market timing I know)? If you did not take profits what do you intend to do if your bonds have negative real yields and you are losing money.
Will you also start up a "bonds are soaring to the heavens" thread when that's the case? :happy
The only problem I see for the staying power of this thread is that bonds are a bit boring, even in free fall or soar mode. :happy
You are holding the wrong funds then... EDV and especially TMF are anything but boring.
True! Just SWAGX, intermediate and state munis. Very dull. I’ll have to look into those others next time I am looking for excitement. Lol

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Re: US Bonds in free fall

Post by Cheez-It Guy » Thu Nov 07, 2019 5:11 pm

I don't really have anything to add. I just want to get in on Page 1 of a potentially long-running thread.

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Re: US Bonds in free fall

Post by jdb » Thu Nov 07, 2019 5:24 pm

stocknoob4111 wrote:
Thu Nov 07, 2019 1:07 pm


All the strong recent gains that Bonds have seen seem to be evaporating as we speak. BIV (Vanguard Intermediate Bond ETF) is DOWN 1.6% month to date so far and still dropping.

Relative to the annual average expected return for the asset class this almost qualifies as a "crash" in my opinion since the drop in just 10 days represents 76% of the SEC yield of the ETF/Fund.
Let me see if I understand this. You have looked at one month of fixed income returns and think that a 1.6% decrease is a “crash”. With all due respect I suggest you get a hobby and don’t look at bond returns till sometime next year and then come back to this site and can discuss. You will sleep better. Good luck.

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Phineas J. Whoopee
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Re: US Bonds in free fall

Post by Phineas J. Whoopee » Thu Nov 07, 2019 5:24 pm

Despite what one might intuitively conclude, expected return is not the return one should expect. It's an imprecise and relative expression about an unlimited period of time. Regardless of expected return, a higher-expected return investment could return less than a lower-expected return one over any interval.

We sometimes say higher-risk investments may have a higher expected return, but you might not get it. That's what risk means.

PJW

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Re: US Bonds in free fall

Post by smectym » Thu Nov 07, 2019 7:42 pm

We have been in a bond bull market for well over 30 years. People have been born, grown up, graduated from college...and started to get gray hair...all during this bull market. It's like the air we breath.

https://www.forbes.com/sites/investor/2 ... 8b46f92b7a

I have no idea what will happen. But I tend to assume that this recent pullback is a blip, that the bond bull market will continue, and that eventually U.S. bonds will approach the zero bound, following the lead of Japan and Europe.

However, IF we were really to enter a secular bond bear market (not a correction measured in a few weeks or months, we've had those...but something that goes on and on--and on and on--), that would be an extraordinary development: probably mostly ominous, given the massive buildup of sovereign, corporate, and household debt.

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Re: US Bonds in free fall

Post by RubyTuesday » Thu Nov 07, 2019 7:58 pm

Will be happy to see yields creep back up a bit.

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Re: US Bonds in free fall

Post by Random Musings » Thu Nov 07, 2019 10:21 pm

Never saw a U.S. Bonds continues to soar thread. I guess 40 years wasn't enough time to react.

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Re: US Bonds in free fall

Post by Bluce » Thu Nov 07, 2019 10:40 pm

RubyTuesday wrote:
Thu Nov 07, 2019 7:58 pm
Will be happy to see yields creep back up a bit.
Me too. One of these days (years?) I will retire and the extra money will be nice, but I'm fine as is -- even with low rates.

My goal is to be the richest guy in the graveyard. :shock: And everything is going according to plan. :twisted:

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Re: US Bonds in free fall

Post by venkman » Fri Nov 08, 2019 12:19 am

stocknoob4111 wrote:
Thu Nov 07, 2019 1:07 pm
Relative to the annual average expected return for the asset class this almost qualifies as a "crash" in my opinion since the drop in just 10 days represents 76% of the SEC yield of the ETF/Fund.
What word would you use to describe the fact that BIV is still up 9.38% year-to-date (more than 4.5 times its SEC yield)?

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Re: US Bonds in free fall

Post by Valuethinker » Fri Nov 08, 2019 5:22 am

dbr wrote:
Thu Nov 07, 2019 2:44 pm
MotoTrojan wrote:
Thu Nov 07, 2019 2:35 pm
stocknoob4111 wrote:
Thu Nov 07, 2019 1:42 pm
I am at a loss why the 10 year Treasury is heading on it's way to breach 2% when the German 10 year Bund is currently yielding -0.24%. How exactly can this staggering divergence be sustainable?
Why? Our economy is doing better. It’s not like a German can simply invest their currency in treasuries and make over 2% more.

Here is a listing of foreign holdings of US Treasuries led by Japan with holdings of over a trillion dollars and with total foreign holdings of over four trillion dollars: https://ticdata.treasury.gov/Publish/mfh.txt

and an article about European investment in US debt: https://seekingalpha.com/article/426401 ... y-american

I don't know anything about what causes the market to accept different interest rates on bonds of different countries.
Answer: currency.

I imagine you can get say 6 per cent in Brasilian local bonds paying in the local currency.

Shouldn't you shift all your US Treasury holdings into Brasilian local bonds? Mexican? Argentinian?

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Re: US Bonds in free fall

Post by goblue100 » Fri Nov 08, 2019 8:50 am

Bluce wrote:
Thu Nov 07, 2019 10:40 pm

My goal is to be the richest guy in the graveyard.
That would be a terrible waste of money.
Financial planners are savers. They want us to be 95 percent confident we can finance a 30-year retirement even though there is an 82 percent probability of being dead by then. - Scott Burns

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Re: US Bonds in free fall

Post by Bluce » Fri Nov 08, 2019 9:41 am

goblue100 wrote:
Fri Nov 08, 2019 8:50 am
Bluce wrote:
Thu Nov 07, 2019 10:40 pm

My goal is to be the richest guy in the graveyard.
That would be a terrible waste of money.
It will go to a charity, but I'd rather have fun and "croak broke."

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Re: US Bonds in free fall

Post by MotoTrojan » Fri Nov 08, 2019 9:50 am

Valuethinker wrote:
Fri Nov 08, 2019 5:22 am
dbr wrote:
Thu Nov 07, 2019 2:44 pm
MotoTrojan wrote:
Thu Nov 07, 2019 2:35 pm
stocknoob4111 wrote:
Thu Nov 07, 2019 1:42 pm
I am at a loss why the 10 year Treasury is heading on it's way to breach 2% when the German 10 year Bund is currently yielding -0.24%. How exactly can this staggering divergence be sustainable?
Why? Our economy is doing better. It’s not like a German can simply invest their currency in treasuries and make over 2% more.

Here is a listing of foreign holdings of US Treasuries led by Japan with holdings of over a trillion dollars and with total foreign holdings of over four trillion dollars: https://ticdata.treasury.gov/Publish/mfh.txt

and an article about European investment in US debt: https://seekingalpha.com/article/426401 ... y-american

I don't know anything about what causes the market to accept different interest rates on bonds of different countries.
Answer: currency.

I imagine you can get say 6 per cent in Brasilian local bonds paying in the local currency.

Shouldn't you shift all your US Treasury holdings into Brasilian local bonds? Mexican? Argentinian?
A measly 6%?! Try Turkish or Pakistani bonds. Mid double-digits!

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Re: US Bonds in free fall

Post by JBTX » Fri Nov 08, 2019 10:00 am

stocknoob4111 wrote:
Thu Nov 07, 2019 4:27 pm
Phineas J. Whoopee wrote:
Thu Nov 07, 2019 4:12 pm
I hardly think a minor upward yield adjustment over one market day is properly described as free fall.
PJW
BIV has dropped 1% in the last 2 days... that amounts to 50% of it's SEC yield. I would definitely call that free fall... it's all relative to the asset class' typical performance. 1% drop for Bonds is huge when they barely have any real yield.
In the late 70s over a 4-5 year term intermediate term bonds lost almost 50% of their value on an inflation adjusted basis. 1% is not huge.

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Re: US Bonds in free fall

Post by nisiprius » Fri Nov 08, 2019 10:19 am

stocknoob4111 wrote:
Thu Nov 07, 2019 1:07 pm
Since this type of thread does not exist here it is now...

All the strong recent gains that Bonds have seen seem to be evaporating as we speak. BIV (Vanguard Intermediate Bond ETF) is DOWN 1.6% month to date so far and still dropping.

Relative to the annual average expected return for the asset class this almost qualifies as a "crash" in my opinion since the drop in just 10 days represents 76% of the SEC yield of the ETF/Fund.

Do we see more downside for Bonds from this point? Did you take profits (market timing I know)? If you did not take profits what do you intend to do if your bonds have negative real yields and you are losing money.
1) Bonds are different from stocks. Thinking of them as both being just thingies with jiggly values is not a good way to think about them. There are differences in behavior that stem from their fundamental differences as debt and as equity.

Nothing is absolute, but conceptually with bonds you know the future, in a way you do not with stocks. If it's an investment-grade bond, as is the case with those held by BIV, the ratings agencies think it has enough of a safety margin to keep its promises. If the bond matures on 6/15/2024, then its market value will be $1,000 on 6/15/2024. And its market value a few days earlier must be very close to $1,000. So whatever goes on between now and maturity has a "what goes up must come down, and vice versa" tendency that is much stronger than any mean reversion in stocks, because it has an "appointment in Samarra:" if it's worth $900 today it must get to $1,000 by 6/15/2024, and if it's worth $1,100 today it must get to $1,000 by 6/15/2024. Therefore, if "staying the course" is reasonable for stocks, it is more reasonable for bonds.

2) "Losing real value" is what we should care about, yes, but it is spin to call losing real value "losing money." Nobody ever talks that way about stocks. Nobody says they "lost money" if they have a larger number dollars now than they started with. People only call a negative real return "losing money" when they are attacking bonds.

3) Vanguard puts BIV at "risk potential" level 2 and says "such funds may be appropriate for investors with medium-term investment horizons (4 to 10 years)." So if you own BIV, you should be planning to hold it for 4-10 years.

4) I haven't been doing anything about those "strong recent gains." If you'd asked me I'd have said that I expected them to evaporate, I really think I would have, but I can't prove it as I'm not on the record with that. I don't plan to do anything about them evaporating. I plan to stay the course in a steady and conservative asset allocation--both stocks and bonds, light on stocks, heavy on bonds, intermediate-term, investment grade--about half TIPS and half Total Bond.

5) There are people who, either through luck or savvy, will duck in and out of bonds and make more money than I do. I don't care. I'm not really sure they can do it, but maybe they can. But I know I can't, so I don't.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: US Bonds in free fall

Post by Bluce » Fri Nov 08, 2019 2:28 pm

nisiprius wrote:
Fri Nov 08, 2019 10:19 am
<SNIP>
4) I haven't been doing anything about those "strong recent gains." If you'd asked me I'd have said that I expected them to evaporate, I really think I would have, but I can't prove it as I'm not on the record with that. I don't plan to do anything about them evaporating. I plan to stay the course in a steady and conservative asset allocation--both stocks and bonds, light on stocks, heavy on bonds, intermediate-term, investment grade--about half TIPS and half Total Bond.
Looks like we're in a similar situation: I'm about 70% bonds, from corps to MBS to Treasurys and other government agencies -- I've made an effort to cover most of the sectors. Last I checked, my overall duration was around 4-5 years; of all my bond holdings, 55% are "A" or better; 82% are BBB or better.

It's all just sitting there waiting for me to retire; meantime all distributions are re-invested. The NAVs aren't that important to me. But, we shall see what the future brings.

"The best-laid plans of mice and men oft go astray." :(

Per today, do we need a "Stocks and bonds are neither soaring or in free-fall" thread . . . ? :confused

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Phineas J. Whoopee
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Re: US Bonds in free fall

Post by Phineas J. Whoopee » Fri Nov 08, 2019 5:41 pm

smectym wrote:
Thu Nov 07, 2019 7:42 pm
We have been in a bond bull market for well over 30 years. People have been born, grown up, graduated from college...and started to get gray hair...all during this bull market. It's like the air we breath.
...
How can there be a bull market for over thirty years in securities that mature in no more than thirty? All the original bonds from more than thirty years ago have been paid off or defaulted on prior to now.

PJW

hudson
Posts: 1961
Joined: Fri Apr 06, 2007 9:15 am

US AAA/AA/A bonds are OK

Post by hudson » Fri Nov 08, 2019 6:02 pm

dbr wrote:
Thu Nov 07, 2019 2:16 pm
Bonds are not in free fall.
I agree. I disregard all talk of bond bubbles and bond free falls. I disregard all interest rate and inflation rate predictions. I expect my 5 year CDs to pay me 3% for 5 years then return my initial investment. CDs are bonds.
For bond funds, I look for Vanguard Risk Potential 1...maybe 2. Funds that are mostly AAA/AA/A are good.
Safe intermediate fixed income investments are just fine.

Lee_WSP
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Location: Arizona

Re: US Bonds in free fall

Post by Lee_WSP » Sat Nov 09, 2019 9:30 am

stocknoob4111 wrote:
Thu Nov 07, 2019 1:07 pm
Since this type of thread does not exist here it is now...

All the strong recent gains that Bonds have seen seem to be evaporating as we speak. BIV (Vanguard Intermediate Bond ETF) is DOWN 1.6% month to date so far and still dropping.

Relative to the annual average expected return for the asset class this almost qualifies as a "crash" in my opinion since the drop in just 10 days represents 76% of the SEC yield of the ETF/Fund.

Do we see more downside for Bonds from this point? Did you take profits (market timing I know)? If you did not take profits what do you intend to do if your bonds have negative real yields and you are losing money.
The recent 3 month "run to the bonds" that ran up the bond prices is what's abnormal. They are barely below September levels and a retreat to July levels would be "normal" in my opinion.

RubyTuesday
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Re: US Bonds in free fall

Post by RubyTuesday » Sat Nov 09, 2019 9:57 am

this massive pullback :confused gave me opportunity to finally get around to exchanging my int term tax exempt to total bond in taxable. my taxable income no longer warrants TE bonds.

hudson
Posts: 1961
Joined: Fri Apr 06, 2007 9:15 am

Re: US Bonds in free fall

Post by hudson » Sat Nov 09, 2019 12:13 pm

RubyTuesday wrote:
Sat Nov 09, 2019 9:57 am
this massive pullback :confused gave me opportunity to finally get around to exchanging my int term tax exempt to total bond in taxable. my taxable income no longer warrants TE bonds.
nice capital gain?

RubyTuesday
Posts: 183
Joined: Fri Oct 19, 2012 11:24 am

Re: US Bonds in free fall

Post by RubyTuesday » Sat Nov 09, 2019 12:28 pm

hudson wrote:
Sat Nov 09, 2019 12:13 pm
RubyTuesday wrote:
Sat Nov 09, 2019 9:57 am
this massive pullback :confused gave me opportunity to finally get around to exchanging my int term tax exempt to total bond in taxable. my taxable income no longer warrants TE bonds.
nice capital gain?
yeah, LTCGs of maybe 17k partially offset by some existing (unfortunately short term) losses, but I wanted to get this done...
probably do the fund conversion to BND ETF and maybe TLH in 2020 if opportunity avails.

hudson
Posts: 1961
Joined: Fri Apr 06, 2007 9:15 am

Re: US Bonds in free fall

Post by hudson » Sat Nov 09, 2019 12:41 pm

RubyTuesday wrote:
Sat Nov 09, 2019 12:28 pm
hudson wrote:
Sat Nov 09, 2019 12:13 pm
RubyTuesday wrote:
Sat Nov 09, 2019 9:57 am
this massive pullback :confused gave me opportunity to finally get around to exchanging my int term tax exempt to total bond in taxable. my taxable income no longer warrants TE bonds.
nice capital gain?
yeah, LTCGs of maybe 17k partially offset by some existing (unfortunately short term) losses, but I wanted to get this done...
probably do the fund conversion to BND ETF and maybe TLH in 2020 if opportunity avails.
I sold some intermediate term tax exempt to buy a CD. I had both long and short term carry over losses. I split the sale so that I would have both LT and ST capital gains. I got tired of trying to do the math before pulling the trigger. I won't know how it works out until I run my tax software.

H-Town
Posts: 2045
Joined: Sun Feb 26, 2017 2:08 pm

Re: US Bonds in free fall

Post by H-Town » Sat Nov 09, 2019 1:00 pm

stocknoob4111 wrote:
Thu Nov 07, 2019 1:07 pm
Since this type of thread does not exist here it is now...

All the strong recent gains that Bonds have seen seem to be evaporating as we speak. BIV (Vanguard Intermediate Bond ETF) is DOWN 1.6% month to date so far and still dropping.

Relative to the annual average expected return for the asset class this almost qualifies as a "crash" in my opinion since the drop in just 10 days represents 76% of the SEC yield of the ETF/Fund.

Do we see more downside for Bonds from this point? Did you take profits (market timing I know)? If you did not take profits what do you intend to do if your bonds have negative real yields and you are losing money.
Do you have stock funds? Since stocks has a nice run in October, sell some stocks and buy bond funds.

They all said: "sell winners and buy losers." Bond funds will have its hey days in the future.

Speckles
Posts: 19
Joined: Sun Jul 21, 2019 1:36 am

Re: US Bonds in free fall

Post by Speckles » Sat Nov 09, 2019 1:55 pm

A smart Boglehead on one of the “stock prices are falling” threads had some actionable advice I liked. Translated to “bond prices falling” it means ... it’s a favorable time for an in-kind conversion (of bond funds) from my IRA to my Roth IRA.

Even though it’s a small drop in bond fund prices, I like pretending I am starting to learn better financial decision making (maybe).

Feel free to correct any errors in my rationale.

dbr
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Joined: Sun Mar 04, 2007 9:50 am

Re: US Bonds in free fall

Post by dbr » Sun Nov 10, 2019 10:09 am

Speckles wrote:
Sat Nov 09, 2019 1:55 pm
A smart Boglehead on one of the “stock prices are falling” threads had some actionable advice I liked. Translated to “bond prices falling” it means ... it’s a favorable time for an in-kind conversion (of bond funds) from my IRA to my Roth IRA.

Even though it’s a small drop in bond fund prices, I like pretending I am starting to learn better financial decision making (maybe).

Feel free to correct any errors in my rationale.
Sure. First of all bonds are not in a free fall. Second volatility in bonds of short and medium duration is nothing like volatility in stocks. Even long term bonds aren't volatile like stocks. Third, nothing wrong with Roth conversions but you say yourself the drop is small, so what is the idea? Also a Roth might best be a place to hold the assets with highest expected returns rather than bonds. Fourth, the dominating principle should be maintaining asset allocation. That might mean selling stocks to buy more bonds, but probably that would be a result of stocks being up more than bonds being down.

PS Have you looked that VBMFX (total bond) has a higher NAV now, in 2016, and in 2012 than at any other times from 1987 on and is only 2% lower than its highest point in 2012 while delivering a ten year total return of 3.56%. Also the current SEC yield is 2.24% There is nothing that is a problem in just investing in an intermediate term bond fund and leaving it alone.

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