BND Fell Today

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JD13
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BND Fell Today

Post by JD13 »

This is weird. Why did Total bond fall today?
mickroark
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Re: BND Fell Today

Post by mickroark »

People have to sell their bonds to get cash to pay their margin debt. Brokers will demand you sell to pay them. :shock:
recklessmax
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Re: BND Fell Today

Post by recklessmax »

is that the only reason BND fell today. What seems to be the outlook for BND from here ?? my 401K allocation is going into it
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geniekid
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Re: BND Fell Today

Post by geniekid »

BND has a market correlation of about -0.03, so it mostly moves independently of the stock market.

Which is to say - I don't know why BND fell, but I wouldn't consider it to be weird.
mystupidglasses
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Re: BND Fell Today

Post by mystupidglasses »

I think the corporates portion of BND dragged it down. Look at VCIT etf (Intermediate-Term Corporate) down 1.68% today.
InvestingGeek
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Re: BND Fell Today

Post by InvestingGeek »

I'm no expert and my reading of it might be wrong but what I can make out is companies face an uncertain earnings outlook now with the virus situation. So corporate debt even with rates so low faces higher default risk and is consequently being discounted. That might be showing up in BND.
nullisland
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Re: BND Fell Today

Post by nullisland »

BND includes around 35% corporate bonds, which have credit risk. The Treasuries in the fund were up modestly today, but corporate bonds were down significantly (for comparison, VCT, Vanguard's Total Corporate Bond ETF, was down 2.24%). The overall result was a slight loss.

Credit risk for bonds tends to reveal itself during significant downturns, which is one reason to consider only holding treasuries for your bond allocation.
columbia
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Re: BND Fell Today

Post by columbia »

Intermediate corporate bonds dropped 1.68% today, so...sure. Not enough juice in govt. bonds to make up for that.
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watchnerd
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Re: BND Fell Today

Post by watchnerd »

mystupidglasses wrote: Mon Mar 09, 2020 3:27 pm I think the corporates portion of BND dragged it down. Look at VCIT etf (Intermediate-Term Corporate) down 1.68% today.
That would be my theory.

And it's also why I've been a fan of not holding corporate bonds -- it inserts business risk into the bond side of the portfolio.

I prefer to keep my business risk on the equity side, and thus all my bonds are flavors of Treasuries.
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watchnerd
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Re: BND Fell Today

Post by watchnerd »

nullisland wrote: Mon Mar 09, 2020 3:42 pm

Credit risk for bonds tends to reveal itself during significant downturns, which is one reason to consider only holding treasuries for your bond allocation.
+1

(see my signature)
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InvestingGeek
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Re: BND Fell Today

Post by InvestingGeek »

Is there a vanguard bond fund that only holds US treasury instruments of varying maturities? Do people here who are holding US govt instruments use bond funds at all or hold them directly?
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watchnerd
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Re: BND Fell Today

Post by watchnerd »

InvestingGeek wrote: Mon Mar 09, 2020 3:51 pm Is there a vanguard bond fund that only holds US treasury instruments of varying maturities? Do people here who are holding US govt instruments use bond funds at all or hold them directly?
No Vanguard offerings that cover all maturities.

In fact, there are hardly any such "total Treasury market" offerings in the market.

GOVT, the iShares total Treasury market index, is one of the few.

https://www.ishares.com/us/products/239 ... y-bond-etf

Personally, I barbell between Long Treasuries and Short TIPS.
Last edited by watchnerd on Mon Mar 09, 2020 3:59 pm, edited 2 times in total.
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German Expat
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Re: BND Fell Today

Post by German Expat »

InvestingGeek wrote: Mon Mar 09, 2020 3:51 pm Is there a vanguard bond fund that only holds US treasury instruments of varying maturities? Do people here who are holding US govt instruments use bond funds at all or hold them directly?
Plenty of them available, we hold in taxable:
https://investor.vanguard.com/mutual-fu ... view/vwiux

Others are for example:
https://investor.vanguard.com/mutual-fu ... file/VUSTX
https://investor.vanguard.com/mutual-fu ... file/VSIGX
https://investor.vanguard.com/mutual-fu ... file/VFISX

You are a bit late to the party though except if you assume negative interest rates coming to the US (not out of the question, I have them in Switzerland). They are a good risk hedge.
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Re: BND Fell Today

Post by sycamore »

InvestingGeek wrote: Mon Mar 09, 2020 3:51 pm Is there a vanguard bond fund that only holds US treasury instruments of varying maturities? Do people here who are holding US govt instruments use bond funds at all or hold them directly?
There's no "total" index bond fund for just treasurys (though there are index funds for short, intermediate, and long).

There is actively managed fund Intermediate Term Treasury fund which holds bond of varying maturities. You can see the fund's maturity distribution here: https://investor.vanguard.com/mutual-fu ... olio/vfitx.

You'll find some people here hold individual bonds (whether laddered or not) and some hold bond funds.
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Re: BND Fell Today

Post by German Expat »

German Expat wrote: Mon Mar 09, 2020 3:57 pm
InvestingGeek wrote: Mon Mar 09, 2020 3:51 pm Is there a vanguard bond fund that only holds US treasury instruments of varying maturities? Do people here who are holding US govt instruments use bond funds at all or hold them directly?
Plenty of them available, we hold in taxable:
https://investor.vanguard.com/mutual-fu ... view/vwiux

Others are for example:
https://investor.vanguard.com/mutual-fu ... file/VUSTX
https://investor.vanguard.com/mutual-fu ... file/VSIGX
https://investor.vanguard.com/mutual-fu ... file/VFISX

You are a bit late to the party though except if you assume negative interest rates coming to the US (not out of the question, I have them in Switzerland). They are a good risk hedge.

If you want varying maturity you will need to mix though.
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watchnerd
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Re: BND Fell Today

Post by watchnerd »

German Expat wrote: Mon Mar 09, 2020 3:57 pm
InvestingGeek wrote: Mon Mar 09, 2020 3:51 pm Is there a vanguard bond fund that only holds US treasury instruments of varying maturities? Do people here who are holding US govt instruments use bond funds at all or hold them directly?
Plenty of them available, we hold in taxable:
https://investor.vanguard.com/mutual-fu ... view/vwiux

Others are for example:
https://investor.vanguard.com/mutual-fu ... file/VUSTX
https://investor.vanguard.com/mutual-fu ... file/VSIGX
https://investor.vanguard.com/mutual-fu ... file/VFISX

You are a bit late to the party though except if you assume negative interest rates coming to the US (not out of the question, I have them in Switzerland). They are a good risk hedge.
But those are all segmented by maturity, not a blend of all maturities, i.e. those are long, intermediate, short, etc.
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tombonneau
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Re: BND Fell Today

Post by tombonneau »

InvestingGeek wrote: Mon Mar 09, 2020 3:51 pm Is there a vanguard bond fund that only holds US treasury instruments of varying maturities? Do people here who are holding US govt instruments use bond funds at all or hold them directly?
I lingered and hemmed and hawed for months but finally moved from VBILX (50/50 govt Corp) into Intermediate Trearsuries VSIGX which is 3-10 years. Middle of road and best you can do with VG funds.

There is a GOVT ETF which holds all maturities of Treasuries that fits the bill though if you can go ETF route. I'm sure watchnerd has already flogged it while I'm tapping this away in my iPad. :)
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Re: BND Fell Today

Post by ivk5 »

InvestingGeek wrote: Mon Mar 09, 2020 3:51 pm Is there a vanguard bond fund that only holds US treasury instruments of varying maturities? Do people here who are holding US govt instruments use bond funds at all or hold them directly?
Vanguard has Short-, Intermediate-, and Long- Term Treasury Funds, as well as a Treasury Money Market Fund.
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Re: BND Fell Today

Post by watchnerd »

tombonneau wrote: Mon Mar 09, 2020 3:59 pm

There is a GOVT ETF which holds all maturities of Treasuries that fits the bill though if you can go ETF route. I'm sure watchnerd has already flogged it while I'm tapping this away in my iPad. :)
Yes, I did. ;)
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Re: BND Fell Today

Post by InvestingGeek »

Thanks, everyone! I'm in total bond market and not about to make any sudden moves - too late with corporate dropping like a rock. But this is good to know for the next time I rethink my AA.
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Re: BND Fell Today

Post by watchnerd »

InvestingGeek wrote: Mon Mar 09, 2020 4:30 pm Thanks, everyone! I'm in total bond market and not about to make any sudden moves - too late with corporate dropping like a rock. But this is good to know for the next time I rethink my AA.
Many BHers will be in your camp because of the default recommendation here to use TBM.

TBM has a long track record, but the bond market is very different from what it used to be.
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YearTrader
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Re: BND Fell Today

Post by YearTrader »

VWOB (Vanguard Emerging Markets Government Bond ETF) is down 7.41% today.

The credit risk premium is pretty much like the equity risk premium nowadays.
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watchnerd
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Re: BND Fell Today

Post by watchnerd »

YearTrader wrote: Mon Mar 09, 2020 4:41 pm VWOB (Vanguard Emerging Markets Government Bond ETF) is down 7.41% today.

The credit risk premium is pretty much like the equity risk premium nowadays.
I was noticing that, too.

It looks like when markets panic, the correlation of EM USD bonds to US TSM goes from the .3-.5 range to the .9+ range.
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Scooter57
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Re: BND Fell Today

Post by Scooter57 »

18% of its bonds were one step away from junk and with today's horrendous drop in crude oil prices potential bankruptcies among oil companies that lose money selling oil at the current price is making investors rethink how much near-junk bonds they want to own. This means a lot more people selling BBB rated corporates than wanting to buy, causing their prices to decline until someone will take them.

Worst case, BBB bonds will not find buyers and bond funds that hold them will see a flight to safety lowering the fund price.
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Re: BND Fell Today

Post by AlohaBill »

And are you a boglehead?
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FIREchief
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Re: BND Fell Today

Post by FIREchief »

watchnerd wrote: Mon Mar 09, 2020 3:47 pm
mystupidglasses wrote: Mon Mar 09, 2020 3:27 pm I think the corporates portion of BND dragged it down. Look at VCIT etf (Intermediate-Term Corporate) down 1.68% today.
That would be my theory.

And it's also why I've been a fan of not holding corporate bonds -- it inserts business risk into the bond side of the portfolio.

I prefer to keep my business risk on the equity side, and thus all my bonds are flavors of Treasuries.
+1 Same here. My fixed is 99%+ individual TIPS. The last thing most people want to see is their fixed income holdings dropping at the same time the market is tanking.
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watchnerd
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Re: BND Fell Today

Post by watchnerd »

FIREchief wrote: Mon Mar 09, 2020 4:52 pm
+1 Same here. My fixed is 99%+ individual TIPS. The last thing most people want to see is their fixed income holdings dropping at the same time the market is tanking.
Major gap in BH thinking on these matters (corp bonds, lack of TIPS).

The Three Fund portfolio recommendation to use TBM has a major flaw in this regard.
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Re: BND Fell Today

Post by dru808 »

watchnerd wrote: Mon Mar 09, 2020 3:57 pm
InvestingGeek wrote: Mon Mar 09, 2020 3:51 pm Is there a vanguard bond fund that only holds US treasury instruments of varying maturities? Do people here who are holding US govt instruments use bond funds at all or hold them directly?
No Vanguard offerings that cover all maturities.

In fact, there are hardly any such "total Treasury market" offerings in the market.

GOVT, the iShares total Treasury market index, is one of the few.

https://www.ishares.com/us/products/239 ... y-bond-etf

Personally, I barbell between Long Treasuries and Short TIPS.

Govt is interesting.

May I ask why you hold short tips instead of treasuries? What is your age?
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firebirdparts
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Re: BND Fell Today

Post by firebirdparts »

I am so sad now. FXNAX, fidelity US bond index, also down.

There are going to be some defaults. Some oil field exploration companies may default. The cruise lines might. Airlines of course do it regularly, so this looks like one of those times. Those are just the obvious ones.
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Re: BND Fell Today

Post by rkhusky »

watchnerd wrote: Mon Mar 09, 2020 5:01 pm The Three Fund portfolio recommendation to use TBM has a major flaw in this regard.
Nothing wrong with Total Bond. Many think that it holds too few corporate bonds. Many like all Treasuries. Therefore, it's probably at the right allocation.
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Re: BND Fell Today

Post by Angst »

JD13 wrote: Mon Mar 09, 2020 3:13 pm This is weird. Why did Total bond fall today?
Yes, as has already been said by now, it's pure Treasuries that really shined today. This is one of the reasons why many advise that Treasuries alone are best for the bond side of one's portfolio, with none of that equity beta, call risk or the problems associated with negative convexity and refinancing of mortgages held in mortgage-backed securities. I don't know why there isn't a Vanguard equivalent to GOVT.
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Re: BND Fell Today

Post by vineviz »

watchnerd wrote: Mon Mar 09, 2020 5:01 pm
FIREchief wrote: Mon Mar 09, 2020 4:52 pm
+1 Same here. My fixed is 99%+ individual TIPS. The last thing most people want to see is their fixed income holdings dropping at the same time the market is tanking.
Major gap in BH thinking on these matters (corp bonds, lack of TIPS).

The Three Fund portfolio recommendation to use TBM has a major flaw in this regard.
+1

Total bond market funds are mediocre in many ways, excellent in none, and terrible in the one dimension that should matter most to investors.
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Re: BND Fell Today

Post by Baldrekr »

I noticed that BND is down 0.22% while its mutual fund equivalent VBTLX is down only 0.09%.

Similarly, while the S&P500 is down 7.60%, the Vanguard ETF tracking it (VOO) is down 7.72% while VOO's mutual fund equivalent VFIAX is down over 8%.
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Re: BND Fell Today

Post by watchnerd »

dru808 wrote: Mon Mar 09, 2020 5:09 pm
May I ask why you hold short tips instead of treasuries? What is your age?
I actually hold both long Treasuries and short TIPS (see my sig).

I'm 49, 2-5 years from early retirement.
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why did VBMFX go DOWN today?

Post by spindrift103 »

As the 10-year treasury yield has been rapidly declining, bond fund prices have been going up (on Friday 3/6, VBMFX went up nearly 1%) Which makes sense.

But today, even though the 10-year declined a further 29%, I noticed VBMFX went DOWN a tad bit. (I would have expected it to jump up even more)

Any ideas as to why?
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Re: why did VBMFX go DOWN today?

Post by Angst »

spindrift103 wrote: Mon Mar 09, 2020 6:23 pm As the 10-year treasury yield has been rapidly declining, bond fund prices have been going up (on Friday 3/6, VBMFX went up nearly 1%) Which makes sense.

But today, even though the 10-year declined a further 29%, I noticed VBMFX went DOWN a tad bit. (I would have expected it to jump up even more)

Any ideas as to why?
It's been discussed here: viewtopic.php?f=10&t=306466
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Re: BND Fell Today

Post by mighty72 »

merged spindrifts thread here
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Re: BND Fell Today

Post by DB2 »

Vanguard Intermediate Treasury (VGIT) was up .59% today by comparison to TBM.
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Re: BND Fell Today

Post by nisiprius »

I don't know, but it illustrates something very important that I've noticed again and again.

I have heard dozens of very confident, very matter-of-fact statements that say "When investment X does A, investment Y tends to do B." Or, "When X does A, investors tend to react by doing B, so investment Y does C." I have found that statements about what investments "tend to" do are wildly unreliable. Investments frequently do something else. And, furthermore, when I bother to actually look at what they have done in the past, I usually find that they have not been reliable in the past, either.
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Re: BND Fell Today

Post by MnD »

Welcome to credit risk.
And just wait till the vast swath of BBB rated corporates get downgraded out of investment class........

-4.66% SPDR Barclays Capital High Yield Bond ETF
-1.68% Vanguard Intermediate-Term Corporate Bond ETF
-0.22% Vanguard Total Bond Market ETF
+0.59% Vanguard Intermediate-Term Treasury ETF
Last edited by MnD on Mon Mar 09, 2020 7:19 pm, edited 1 time in total.
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Re: BND Fell Today

Post by Retired1809 »

Just as another data point, DODIX (Dodge & Cox Income Fund) declined 1.04% today (Monday). Vanguard GNMA mutual fund declined 0.09% but my winner was VBITX (Short-term Bond Index fund) was unchanged. Even Wellesley let me down (-3.13% for the day).

My recommendation for a day like this: deep slow breathing and yoga.
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Re: BND Fell Today

Post by watchnerd »

nisiprius wrote: Mon Mar 09, 2020 7:08 pm And, furthermore, when I bother to actually look at what they have done in the past, I usually find that they have not been reliable in the past, either.

Yes, human beings are unreliable animals in our decision making.
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Re: BND Fell Today

Post by Grt2bOutdoors »

MnD wrote: Mon Mar 09, 2020 7:18 pm Welcome to credit risk.
And just wait till the vast swath of BBB rated corporates get downgraded out of investment class........

-4.66% SPDR Barclays Capital High Yield Bond ETF
-1.68% Vanguard Intermediate-Term Corporate Bond ETF
-0.22% Vanguard Total Bond Market ETF
+0.59% Vanguard Intermediate-Term Treasury ETF
A two notch downgrade is significant, not likely to happen in one fell swoop. Some will evidently be wiped out but not all downgrades are destined for default. You can have lower rated bonds still make timely remittances of interest and principal, its just that their financial and/or operational situation will be riskier or shall we say more tenuous. There are likely higher quality names in the Vanguard fund above, hence the lower loss compared to the High Yield Bond fund.
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Re: BND Fell Today

Post by rkhusky »

Why all the angst about 1 day performance? Total Bond has a 1-year return of 11.85% and a 10-year return of 3.89%, while Intermediate Treasury has 1-year return of 10.68% and a 10-year return of 3.50%. You get a little more return for a little more risk with Total Bond.
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Re: BND Fell Today

Post by FIREchief »

rkhusky wrote: Mon Mar 09, 2020 9:47 pm You get got a little more return for a little more risk with Total Bond.
fixed
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Re: BND Fell Today

Post by Elysium »

Corporate bonds were not the only bonds that fell today, TIPS, both long & short fell quite a lot. Most TIPS funds are down 1% to 2% at close. Perhaps, with risk of recession looming, inflation is moot.
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Re: BND Fell Today

Post by Grt2bOutdoors »

Elysium wrote: Mon Mar 09, 2020 10:41 pm Corporate bonds were not the only bonds that fell today, TIPS, both long & short fell quite a lot. Most TIPS funds are down 1% to 2% at close. Perhaps, with risk of recession looming, inflation is moot.
No, my take is the panic is close to reaching its higher points where everything liquid is sold at ANY price, the objective is to deliver cash to close out margin accounts. Right now, there are more than a few accounts being closed out, along with quite a few who have thrown up their hands and said "get me out at any price".
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Re: BND Fell Today

Post by VeganBH »

Retired1809 wrote: Mon Mar 09, 2020 7:19 pm Just as another data point, DODIX (Dodge & Cox Income Fund) declined 1.04% today (Monday). Vanguard GNMA mutual fund declined 0.09% but my winner was VBITX (Short-term Bond Index fund) was unchanged. Even Wellesley let me down (-3.13% for the day).

My recommendation for a day like this: deep slow breathing and yoga.
You made me take a look at my Wellesley....that IS a bit of a let down. :x

Good advice (and for me, add in a nice hike). :happy
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Re: BND Fell Today

Post by Moochy »

BND has 18% BBB, VCIT has more. With oil getting destroyed, shale drillers are getting hammered and their BBB bonds are getting downgraded to real junk. A lot of shale drillers are edging towards going BK. Interest rates are heading to zero...who woulda thunk. Danger.
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Re: BND Fell Today

Post by tombonneau »

YearTrader wrote: Mon Mar 09, 2020 4:41 pm VWOB (Vanguard Emerging Markets Government Bond ETF) is down 7.41% today.

The credit risk premium is pretty much like the equity risk premium nowadays.
VEMBX Emerging Markets Bond only down 3.42%.

+1 for active management. :twisted:
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