Total Bond Market Down >4%

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Kenkat
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Re: Why is BND going down?

Post by Kenkat »

watchnerd wrote: Thu Mar 12, 2020 12:25 pm
Kenkat wrote: Thu Mar 12, 2020 12:03 pm Corporates do better than TBM (and treasuries) in normal markets. Since we don’t know what is coming, TBM positions you for both.
Sure, it's a compromise.

But if people are complaining that corporates / TBM go down in bear markets -- well, that's the price you pay for getting better performance in normal markets.

There is no free lunch.
Yup absolutely agree.
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Re: Why is BND going down?

Post by tombonneau »

watchnerd wrote: Thu Mar 12, 2020 12:25 pm
Kenkat wrote: Thu Mar 12, 2020 12:03 pm Corporates do better than TBM (and treasuries) in normal markets. Since we don’t know what is coming, TBM positions you for both.
Sure, it's a compromise.

But if people are complaining that corporates / TBM go down in bear markets -- well, that's the price you pay for getting better performance in normal markets.

There is no free lunch.
It was kind of a "well duh" moment after reading Swedroe/Swensen to realize you just use Treasuries for your riskless/bond side and that allows you to increase risk on equity side whose addition will earn better returns than a co-mingled melange of Treasuries/Corporate/Misc.
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FIREchief
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Re: Why is BND going down?

Post by FIREchief »

watchnerd wrote: Thu Mar 12, 2020 11:35 am I bet if Vanguard made a "Total Treasuries Market" bond fund (like GOVT), it would sell well.
It probably would, especially when people experience the "ugly" that corporate bonds can add to a large market downturn like now. Personally, I would rather just own individual treasuries. I can control maturities and pay absolutely zero in expenses. Also, as most are aware, there is really no benefit of "diversification" with US treasuries, so no need to hold hundreds (or more) issues like in a total market bond fund to control risk. 8-)
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
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Taylor Larimore
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Re: Why is BND going down?

Post by Taylor Larimore »

sixtyforty wrote: Thu Mar 12, 2020 10:43 am I'm also re-thinking the BND allocation to a portfolio. In a bull market it's basically is a drag. In a brutal bear market it doesn't seem to help much.
sixtyforty:

With stocks currently DOWN about -20% and BND (total bond market) UP about +3% year to date, BND holders should be very happy they own BND.

It is informative to know that Total Bond Market's worst annual loss was -2.66% in 1994. It gained +16% in 1995.

Stay the course

Taylor
Jack Bogle's Words of Wisdom: "Deep Down, I remain absolutely confident that the vast majority of American families will be well served by owning their equity holding in an all-U.S. stock-market index portfolio and holding their bonds in an all-U.S. bond-market index portfolio."
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lkar
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Re: Total Bond Market Down >4%

Post by lkar »

Clearly I am guilty of not understanding what I own watching AGG get crushed today with the rest of the market.

Oh, well, nothing to do but sit and ride out and commit to becoming more educated after the dust settles and I have a better sense of what to do with the “safe” side of my AA.
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Re: Why is BND going down?

Post by watchnerd »

tombonneau wrote: Thu Mar 12, 2020 1:45 pm
It was kind of a "well duh" moment after reading Swedroe/Swensen to realize you just use Treasuries for your riskless/bond side and that allows you to increase risk on equity side whose addition will earn better returns than a co-mingled melange of Treasuries/Corporate/Misc.
+1

70/30 (Int Treasuries) advances the efficient frontier with better returns and little change in Sharpe ratio vs 60/40 (TBM):

https://www.portfoliovisualizer.com/eff ... Weight3=40
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Caduceus
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Re: Total Bond Market Down >4%

Post by Caduceus »

Can I just say that Warren Buffett, again, looks amazingly pre-scient now? People kept asking him why he was hoarding so much cash and why all that cash was in ultra short term Treasuries.

Now they know.

He's probably the only person in the world with a $120 billion cash hoard going shopping for any stocks he likes at fire sale prices now.
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Average Investor
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Re: Total Bond Market Down >4%

Post by Average Investor »

BND currently down -6.04% 30 minutes to close. So much for rebalancing today!
Tomorrow never knows.
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Re: Total Bond Market Down >4%

Post by mrwalken »

Average Investor wrote: Thu Mar 12, 2020 2:30 pm BND currently down -6.04% 30 minutes to close. So much for rebalancing today!
YOUCH! Cash is king.
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Re: Total Bond Market Down >4%

Post by Starfox »

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My BND fell down and can't get up -- what's with safe bond returns?

Post by CULater »

[Merged into ongoing discussion -- mod oldcomputerguy]

I was shocked to discover that BND (Total U.S. bond market) looks like it's down over 5% today and nearing -10% return since the peak. What's happening? I thought this was supposed to be the ballast in stormy seas. Anyone have an explanation for why this is happening?
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Triple digit golfer
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Re: My BND fell down and can't get up -- what's with safe bond returns?

Post by Triple digit golfer »

I don't know, but I looked at what the stock market was doing, pulled the trigger on rebalancing because I thought I hit my 5% bands, and didn't even consider what bonds were doing. So now I really rebalanced at about 3.5% band instead of 5% and ultimately "overbalanced" by about 1%. :oops:
mrwalken
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Re: My BND fell down and can't get up -- what's with safe bond returns?

Post by mrwalken »

Bonds are a risky asset and can go down a lot. Unfortunately, with current yields, there is no chance for BND to go up substantially. Reward-free risk, and you are seeing the risk element come into play.
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Re: My BND fell down and can't get up -- what's with safe bond returns?

Post by GAAP »

Bonds may be generally uncorrelated or even negatively correlated with stocks. However, that does not imply that bonds will always go up when stocks go down, or vice versa. It also does not imply that the scale of any change in bonds will match the change in stocks. Bad news overall is bad news for market assets.

BND is still down less than VTI today.
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Re: My BND fell down and can't get up -- what's with safe bond returns?

Post by simplesimon »

There's another thread about BND - likely has to do with its corporate bond holdings.
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Re: My BND fell down and can't get up -- what's with safe bond returns?

Post by bgf »

never though id TLH my bonds but... well, can i swap AGG for BND? safer to go with intermediate term?
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Re: My BND fell down and can't get up -- what's with safe bond returns?

Post by lgs88 »

CULater wrote: Thu Mar 12, 2020 2:41 pm I was shocked to discover that BND (Total U.S. bond market) looks like it's down over 5% today and nearing -10% return since the peak. What's happening? I thought this was supposed to be the ballast in stormy seas. Anyone have an explanation for why this is happening?
There must be liquidity issues in the market. Too many sellers. BND is down more than any of VGIT (Vanguard Intermediate Treasury) and VCIT (Vanguard Intermediate Corporate) and VMBS (Vanguard Mortgage-Backed Securities). You'd expect BND to ROUGHLY follow the mean of VGIT and VCIT with a dash of VMBS, because that's pretty much what it is. Do we have access to intraday NAV to check my guess?
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Re: My BND fell down and can't get up -- what's with safe bond returns?

Post by cheezit »

simplesimon wrote: Thu Mar 12, 2020 2:56 pm There's another thread about BND - likely has to do with its corporate bond holdings.
I thought that at first, but BND is down substantially more on the day than either treasurys of similar duration (VGIT) or corporates of similar duration (VCIT). Does BND/VBMAX hold a bunch of munis? VTEB was down about 5.5% today, that could explain part of it. Or, it could be trading at a discount to NAV at the closing bell for whatever reason (did VBMAX go down the same amount?).
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Re: My BND fell down and can't get up -- what's with safe bond returns?

Post by lgs88 »

cheezit wrote: Thu Mar 12, 2020 3:02 pm I thought that at first, but BND is down substantially more on the day than either treasurys of similar duration (VGIT) or corporates of similar duration (VCIT).
Yes, this is the trick. Curiouser and curiouser. I don't think BND would hold tax-free bonds; it's supposed to be a taxable bond fund.
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stocknoob4111
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Re: Total Bond Market Down >4%

Post by stocknoob4111 »

I own VBILX, do I need to get my money out of Bonds now? I don't want Bonds to go into a meltdown as well...seesh! This is absolutely insane, BND down almost 6% today, not too far off from the S&P 500 itself. If Bonds have so much risk then it clearly is not communicated clearly to most people.
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Re: Total Bond Market Down >4%

Post by moneyman11 »

mystupidglasses wrote: Thu Mar 12, 2020 9:33 am
Elysium wrote: Thu Mar 12, 2020 9:28 am This is the problem with ETFs. Real bonds aren't down that much, the ETF market value is showing larger intra-day drops in the past few days than the NAV of the mutual funds at close. Especially happening for bond funds. Another reason I don't own ETFs. Helps tune out the noise, as a long term investors who isn't interested in minute by minute update of prices, I don't see any reason why anyone wants to be in these.
I agree that there is something askew in the behavior of BND vs VBTLX yesterday and today. They did close at very different levels on 3/11 (roughly -2% and -0.6%). As for today, compare BND to BIV (Intermediate-Term Bond) and once again they're further apart than you would predict.

This is EXACTLY what happened in 2008/2009 and I've stayed far away from bond ETFs ever since. Here it is cropping up again. You can look back at my post history from 2008 and see what you are in for. Good luck.
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Re: Total Bond Market Down >4%

Post by Gufomel »

moneyman11 wrote: Thu Mar 12, 2020 3:22 pm
mystupidglasses wrote: Thu Mar 12, 2020 9:33 am
Elysium wrote: Thu Mar 12, 2020 9:28 am This is the problem with ETFs. Real bonds aren't down that much, the ETF market value is showing larger intra-day drops in the past few days than the NAV of the mutual funds at close. Especially happening for bond funds. Another reason I don't own ETFs. Helps tune out the noise, as a long term investors who isn't interested in minute by minute update of prices, I don't see any reason why anyone wants to be in these.
I agree that there is something askew in the behavior of BND vs VBTLX yesterday and today. They did close at very different levels on 3/11 (roughly -2% and -0.6%). As for today, compare BND to BIV (Intermediate-Term Bond) and once again they're further apart than you would predict.

This is EXACTLY what happened in 2008/2009 and I've stayed far away from bond ETFs ever since. Here it is cropping up again. You can look back at my post history from 2008 and see what you are in for. Good luck.
So is the thought that the total bond fund (VBTLX) might close down ~2% or so once the NAV is posted, which would be more in line with the intermediate ETF (BIV) that closed down 1.73%, as opposed to the total bond ETF (BND) which closed down 5.44%?
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Re: Total Bond Market Down >4%

Post by nisiprius »

Vanguard Intermediate-Term Treasury fund, VFITX, green: down a little.
Vanguard Corporate Bond Index Fund, orange: down a more.
Vanguard Total Bond Market Index Fund, blue, holding both Treasury securities and corporates: in between, as you'd expect.
Three bond funds: alike.
Stock fund different.
(VTI, yellow)

Source

Image
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Re: Total Bond Market Down >4%

Post by Corsair »

Interesting BND holds 18.2% in BBB while Fidelity's FXNAX only holds 8.90%. BND 63% in Government, FXNAX 71%. I know little about bonds.
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Re: Total Bond Market Down >4%

Post by lgs88 »

nisiprius wrote: Thu Mar 12, 2020 3:32 pm Vanguard Intermediate-Term Treasury fund, VFITX, green: down a little.
Vanguard Corporate Bond Index Fund, orange: down a more.
Vanguard Total Bond Market Index Fund, blue, holding both Treasury securities and corporates: in between, as you'd expect.
Three bond funds: alike.
Stock fund different.
(VTI, yellow)

Source

Image
Nisiprius, this is a helpful chart. However, I respectfully submit that there’s something wonky going on with BND, since today it plunged by a considerably greater percentage than did either intermediate-term treasuries or intermediate-term corporates, the combination of which you’d expect it to roughly track.
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Re: Total Bond Market Down >4%

Post by sk.dolcevita »

3/6/2020 3/11/2020 Change
BND 88.14 80.33 -9%
VBTLX 11.63 11.40 -2%

How is this possible if the two represent the same underlying securities? More importantly, how does this disparity resolve it self? Will BND go up? Will VBTLX go down? Or will they meet in the middle?

PS BND is down another 5%+ today but posted only up to yesterday's close as 3/12 NAV for VBTLX is yet to be updated.
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Re: Total Bond Market Down >4%

Post by Corsair »

sk.dolcevita wrote: Thu Mar 12, 2020 3:52 pm 3/6/2020 3/11/2020 Change
BND 88.14 80.33 -9%
VBTLX 11.63 11.40 -2%

How is this possible if the two represent the same underlying securities? More importantly, how does this disparity resolve it self? Will BND go up? Will VBTLX go down? Or will they meet in the middle?

PS BND is down another 5%+ today but posted only up to yesterday's close as 3/12 NAV for VBTLX is yet to be updated.
Could it be because people are shorting BND? One could buy put contracts on it. I don't believe one could short or buy options a mutual fund. Again, I know nothing about bonds...
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Re: Total Bond Market Down >4%

Post by sk.dolcevita »

Corsair wrote: Thu Mar 12, 2020 3:54 pm
sk.dolcevita wrote: Thu Mar 12, 2020 3:52 pm 3/6/2020 3/11/2020 Change
BND 88.14 80.33 -9%
VBTLX 11.63 11.40 -2%

How is this possible if the two represent the same underlying securities? More importantly, how does this disparity resolve it self? Will BND go up? Will VBTLX go down? Or will they meet in the middle?

PS BND is down another 5%+ today but posted only up to yesterday's close as 3/12 NAV for VBTLX is yet to be updated.
Could it be because people are shorting BND? One could buy put contracts on it. I don't believe one could short or buy options a mutual fund. Again, I know nothing about bonds...
What little I can gather from googling is that cash-starved investors are selling as they try to stay put in equities. that gold is down as well supports this hypothesis. But the VBTLX and BND disparity cannot last - it represents the same basket of securities. I guess the arbitrage market is not efficient in this case.
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Post by grayfox »

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Re: Total Bond Market Down >4%

Post by msi »

Many bond ETFs are trading below NAV, not just Total Bond Market. It's a liquidity issue.
https://www.bloomberg.com/news/articles ... -bond-etfs
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Re: Total Bond Market Down >4%

Post by 1789 »

mrwalken wrote: Thu Mar 12, 2020 2:33 pm
Average Investor wrote: Thu Mar 12, 2020 2:30 pm BND currently down -6.04% 30 minutes to close. So much for rebalancing today!
YOUCH! Cash is king.
It is incredible so many people ignore the importance of CASH in the forum. While i am a believer of bond’s value in a portfolio we just hold TSM/SP500 and CASH. We are happy with results so far.
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Re: Total Bond Market Down >4%

Post by zonto »

Yes, this is pretty easy to see if you go to performance charts on Morningstar for a given bond mutual fund (say: VBTLX) and then compare to returns for the corresponding ETF (BND). Through yesterday's close, YTD performance was respectively 3.38% and 1.17%. After results are updated for today, it will be even worse.

Think I'm done with bond ETFs after prices snap back to NAV. Assumed it would be ok in Treasury bond ETFs given they don't have credit risk, but the same problem is happening there too.
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Re: Total Bond Market Down >4%

Post by rich126 »

Caduceus wrote: Thu Mar 12, 2020 2:16 pm Can I just say that Warren Buffett, again, looks amazingly pre-scient now? People kept asking him why he was hoarding so much cash and why all that cash was in ultra short term Treasuries.

Now they know.

He's probably the only person in the world with a $120 billion cash hoard going shopping for any stocks he likes at fire sale prices now.
I think more than a few people thought the market was significantly over priced but I am a fan of his patience. Of course if he was perfect he wouldn't be holding multiple airline stocks (Southwest, United, Delta), banks (BOA), and oil (OXY). His portfolio has taken a good 20-25% tumble. The good thing is that he has a lot of cash to buy bargains if he chooses to do so. People fully invested don't have that option or sold out of bonds on the first small drop and are out of powder.

To many people want to follow the joneses because they are afraid to be wrong or picked on (i.e., most fund managers) but he clearly has patience.
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Re: Total Bond Market Down >4%

Post by keyfort »

zonto wrote: Thu Mar 12, 2020 4:45 pm Yes, this is pretty easy to see if you go to performance charts on Morningstar for a given bond mutual fund (say: VBTLX) and then compare to returns for the corresponding ETF (BND). Through yesterday's close, YTD performance was respectively 3.38% and 1.17%. After results are updated for today, it will be even worse.

Think I'm done with bond ETFs after prices snap back to NAV. Assumed it would be ok in Treasury bond ETFs given they don't have credit risk, but the same problem is happening there too.
Wow, I'm completely blindsided by this!

We hold both VBTLX and the BND ETF version, but I had NO idea at all that their prices could move so differently!

And it's just liquidity?
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Re: Total Bond Market Down >4%

Post by CULater »

Apparently the Fed had to step in to the bond market. Makes you wonder about a complete melt-down.
Amid frenzied trading over the past week, the more-than-$15 trillion U.S. Treasury market showed cracks that raised eyebrows across Wall Street, and finally led the Fed to funnel trillions into funding markets and tweak this month’s bond purchases.

I have never seen moves like this in 35 years of trading. I’ve never seen anything like it. At this point, the market will get absolutely exhausted,” said Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities.
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Re: Total Bond Market Down >4%

Post by Ocean77 »

The bond portion of my portfolio is entirely in short and intermediate term treasuries, and they have been going up nicely. The whole purpose of having bonds in the portfolio was for a situation like this when there is economic distress. You don't want to be a lender to corporations in such a time.
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Re: Total Bond Market Down >4%

Post by vineviz »

zonto wrote: Thu Mar 12, 2020 4:45 pm Yes, this is pretty easy to see if you go to performance charts on Morningstar for a given bond mutual fund (say: VBTLX) and then compare to returns for the corresponding ETF (BND). Through yesterday's close, YTD performance was respectively 3.38% and 1.17%. After results are updated for today, it will be even worse.

Think I'm done with bond ETFs after prices snap back to NAV. Assumed it would be ok in Treasury bond ETFs given they don't have credit risk, but the same problem is happening there too.
It’s much more likely that the NAV of VBTLX is wrong than that the price of BND is wrong.
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Re: Total Bond Market Down >4%

Post by CULater »

VGLT down 1.28% today while TLT was up 0.62%. What happened?
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Re: Total Bond Market Down >4%

Post by watchnerd »

CULater wrote: Thu Mar 12, 2020 5:16 pm VGLT down 1.28% today while TLT was up 0.62%. What happened?
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Re: Total Bond Market Down >4%

Post by omedus82 »

I don't invest in ETFs, but according to Vanguard's website, here's today's performance for various bond funds:

VBTLX (TBM): -0.96%
VICSX (interm-term corporates): -1.90%
VSIGX (interm-term treasury): +0.04%

This looks about right given that TBM is mainly a mix of corporates and treasuries. I'll add this to my list of reasons why I hate ETFs.
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Re: Total Bond Market Down >4%

Post by Gufomel »

vineviz wrote: Thu Mar 12, 2020 5:12 pm
zonto wrote: Thu Mar 12, 2020 4:45 pm Yes, this is pretty easy to see if you go to performance charts on Morningstar for a given bond mutual fund (say: VBTLX) and then compare to returns for the corresponding ETF (BND). Through yesterday's close, YTD performance was respectively 3.38% and 1.17%. After results are updated for today, it will be even worse.

Think I'm done with bond ETFs after prices snap back to NAV. Assumed it would be ok in Treasury bond ETFs given they don't have credit risk, but the same problem is happening there too.
It’s much more likely that the NAV of VBTLX is wrong than that the price of BND is wrong.
Do you have a basis for this? Genuinely interested.

If liquidity issues are the problem, it would seem that the ETFs would be what are mis-priced. How could the NAV be wrong? Isn’t that just a computation of all the underlying bonds? I’m pretty ignorant in this space, so I welcome to be educated.
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Re: Total Bond Market Down >4%

Post by MotoTrojan »

Today is more about the suggestion to take your risk on the equity side, not the bond side; ie. to use treasuries and a bit more equity allocation rather than taking credit risk for increased bond yield (corporate, muni, MBS, high-yield, EM).
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Re: Why is BND going down?

Post by GaryA505 »

watchnerd wrote: Thu Mar 12, 2020 10:40 am Total bond market, corporate bonds and muni bonds have all have credit risk amongst their holdings.

Credit risk shows up in bad markets.

Those higher yields or tax-free yields are not a free lunch.

I hold Treasuries for this reason (see signature).
It's treasuries for me too. BND and VBTLX are too polluted for my taste. If I wanted corp bond funds or MBB funds I'd buy them.
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Re: Total Bond Market Down >4%

Post by bgf »

something whacky happened with BND because IUSB, which unlike BND holds high yield, was far less volatile today.
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alan
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Why did bond mutual fund values go down so much today?

Post by alan »

[Merged into the ongoing discussion — mod oldcomputerguy]

Obviously because rates went up. But why did they go up? Thanks,
Alan
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Re: Total Bond Market Down >4%

Post by mathguy3021 »

This is why I prefer stable value funds in a 401(k) and I bonds outside of retirement accounts instead of bond funds. I don't own traditional bond funds. One of the smartest decisions I made was reducing risk and shifting a large portion of my stock funds to the stable value fund before the recent stock market crash.
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Re: Total Bond Market Down >4%

Post by tarheel »

I did a fairly large rebalance of VBTIX into equities today, and then quick checked the ETF during trading hours and saw that BND was down 5% and was sort of dissapointed, but wasn't going to cancel the trades.

Then just like the rest of you saw that VBTIX was only down 0.96% for the day. Yay.

Like others, I am fairly knowledgeable but never in a million years would expect such an gap. What the heck is going on???
Baldrekr
Posts: 24
Joined: Tue Oct 18, 2016 9:12 pm
Location: Seattle, WA

Re: Total Bond Market Down >4%

Post by Baldrekr »

My 401k has Vanguard Total Bond Market Institutional (VBTIX) and that is down only 0.96%, even though it has identical holdings composition to BND.
JoeFriday
Posts: 7
Joined: Sat May 18, 2019 11:33 am

Re: Why is BND going down?

Post by JoeFriday »

Starfox wrote: Thu Mar 12, 2020 10:01 am VTEB which is intermediate term muni with 5 year duration, is down 6% today. :|
Some muni bonds linked to travel and/or transportation now look riskier due to caronavirus impacts. Credit quality of other issues resulting in demand for higher yields by the pros who actually buy individual bonds. So, these bonds carry higher yield/lower price.
pascalwager
Posts: 1869
Joined: Mon Oct 31, 2011 8:36 pm

Re: Total Bond Market Down >4%

Post by pascalwager »

tarheel wrote: Thu Mar 12, 2020 8:25 pm I did a fairly large rebalance of VBTIX into equities today, and then quick checked the ETF during trading hours and saw that BND was down 5% and was sort of dissapointed, but wasn't going to cancel the trades.

Then just like the rest of you saw that VBTIX was only down 0.96% for the day. Yay.

Like others, I am fairly knowledgeable but never in a million years would expect such an gap. What the heck is going on???
I did the same (very large) rebalance today from the Vg total bond index fund and was initially stunned when I saw the BND loss. Rick Ferri warned us several years ago to avoid bond ETFs. Bill Bernstein did, too, in his last book.
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