Why are bonds falling?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Topic Author
mrwalken
Posts: 175
Joined: Sat Oct 08, 2011 5:51 pm

Total Bond Market Down >4%

Post by mrwalken »

Does this validate the viewpoint that has been expressed by some here that the potential (paltry) returns from bonds at present do not justify the risk? Better to stick with risk-free fixed assets (CDs, high yield savings accounts, IBonds, etc)?
Jebediah
Posts: 755
Joined: Tue Aug 28, 2012 9:19 pm
Location: Austin TX

Re: Total Bond Market Down >4%

Post by Jebediah »

yes, those things, which are a hassle, and treasuries, which are not.
CheckMate404
Posts: 42
Joined: Sat Oct 06, 2018 10:49 pm

Re: Total Bond Market Down >4%

Post by CheckMate404 »

If bond prices are down, that means yield just went up. Unless there are a large number of defaults, you’ll end up getting the same return over the long term either way.

Stay the course.
User avatar
firebirdparts
Posts: 1872
Joined: Thu Jun 13, 2019 4:21 pm

Re: Total Bond Market Down >4%

Post by firebirdparts »

I don't know. You have to have some idea what "bonds" are and you have to have some idea of what "down" is, and then you have to have some idea of what "justify" is. You can buy whatever you want, and the first step in that is to know what you want. that thread on "why do you hold bonds" has some semi-rational answers to that question.

I think it's pretty much true that there are bonds that behave in a pretty much "risk free" way if that's what you want. You just have to know that you want that.
A fool and your money are soon partners
silent_john
Posts: 26
Joined: Tue Mar 03, 2020 1:50 pm

Re: Total Bond Market Down >4%

Post by silent_john »

I would have liked to rebalance into stocks...not with my TBM fund down over 4%. RIP. :oops:
User avatar
Kenkat
Posts: 6723
Joined: Thu Mar 01, 2007 11:18 am
Location: Cincinnati, OH

Re: Total Bond Market Down >4%

Post by Kenkat »

Are you talking about Total Bond Market Index? It’s up 3.67% for the year as of Thurs. 3/12 close.
Elysium
Posts: 3223
Joined: Mon Apr 02, 2007 6:22 pm

Re: Total Bond Market Down >4%

Post by Elysium »

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.
stocknoob4111
Posts: 1578
Joined: Sun Jan 07, 2018 12:52 pm

Re: Total Bond Market Down >4%

Post by stocknoob4111 »

CheckMate404 wrote: Thu Mar 12, 2020 9:23 am If bond prices are down, that means yield just went up.
Yields did not go up, infact they are DOWN sharply. Bonds are selling off for other reasons - perhaps redemptions, perhaps due to the BB and BBB debt in their holdings that are preceived as a default risk. It isn't interest rate related because interest rates fell today sharply. TNX is down 19%, bonds SHOULD be up sharply instead they are selling off.

This is an example of why NOT to hold these Bond funds which hold all this corporate debt.
Elysium
Posts: 3223
Joined: Mon Apr 02, 2007 6:22 pm

Re: Total Bond Market Down >4%

Post by Elysium »

Kenkat wrote: Thu Mar 12, 2020 9:25 am Are you talking about Total Bond Market Index? It’s up 3.67% for the year as of Thurs. 3/12 close.
They are talking about BND which is down 4% in the opening hours. This is the problem with focus on minute by minute update on prices. We went cuckoo crazy from being long term investors posting Portfolio Visualizer returns for 10 year and 20 years returns to maniacs inspecting minute by minute price movements of assets.
:oops:
mystupidglasses
Posts: 37
Joined: Tue Sep 15, 2015 4:52 pm

Re: Total Bond Market Down >4%

Post by mystupidglasses »

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.
Moochy
Posts: 25
Joined: Sun Apr 15, 2018 2:44 am

Re: Total Bond Market Down >4%

Post by Moochy »

stocknoob4111 wrote: Thu Mar 12, 2020 9:28 am
CheckMate404 wrote: Thu Mar 12, 2020 9:23 am If bond prices are down, that means yield just went up.
Yields did not go up, infact they are DOWN sharply. Bonds are selling off for other reasons - perhaps redemptions, perhaps due to the BB and BBB debt in their holdings that are preceived as a default risk. It isn't interest rate related because interest rates fell today sharply. TNX is down 19%, bonds SHOULD be up sharply instead they are selling off.

This is an example of why NOT to hold these Bond funds which hold all this corporate debt.

This is exactly why corporate bond funds are down. Those etf's/mutual funds holding BBB bonds are likely going to find those bonds downgraded to real junk. Some corporate issuers are going to face difficulty paying interest on higher grade bonds going forward also.
BoggledHead2
Posts: 562
Joined: Tue Jun 12, 2018 6:50 pm

Re: Total Bond Market Down >4%

Post by BoggledHead2 »

mrwalken wrote: Thu Mar 12, 2020 9:18 am Does this validate the viewpoint that has been expressed by some here that the potential (paltry) returns from bonds at present do not justify the risk? Better to stick with risk-free fixed assets (CDs, high yield savings accounts, IBonds, etc)?
I honestly have no idea why anyone would buy bonds

At no point will my “safe” portion of portfolio be in something that is still volatile and can experience these declines

CD ladders and HYS accounts for me
JD13
Posts: 79
Joined: Thu Nov 01, 2018 8:12 pm

Re: Total Bond Market Down >4%

Post by JD13 »

VTEB also down by 7% since high point. Seems like cash was better than these bond funds at the moment
ljb1234
Posts: 91
Joined: Wed Aug 05, 2015 5:59 am

Re: Total Bond Market Down >4%

Post by ljb1234 »

Treasuries are doing OK today. BND is not just Treasury bonds.
Things could change alot by end of day. Who knows?
User avatar
Ramjet
Posts: 495
Joined: Thu Feb 06, 2020 11:45 am

Re: Total Bond Market Down >4%

Post by Ramjet »

2 days of unexpected correlation and everyone freaks out
CheckMate404
Posts: 42
Joined: Sat Oct 06, 2018 10:49 pm

Re: Total Bond Market Down >4%

Post by CheckMate404 »

stocknoob4111 wrote: Thu Mar 12, 2020 9:28 am
CheckMate404 wrote: Thu Mar 12, 2020 9:23 am If bond prices are down, that means yield just went up.
Yields did not go up, infact they are DOWN sharply. Bonds are selling off for other reasons - perhaps redemptions, perhaps due to the BB and BBB debt in their holdings that are preceived as a default risk. It isn't interest rate related because interest rates fell today sharply. TNX is down 19%, bonds SHOULD be up sharply instead they are selling off.

This is an example of why NOT to hold these Bond funds which hold all this corporate debt.
Honest question, by what measurement are you saying yields aren’t up? SEC Yield is based on the last 30 days, I expect it’d take some time to see price changes reflected there. BND is also about even for the last 30 days, for what that’s worth.
bugleheadd
Posts: 366
Joined: Fri Nov 29, 2019 11:25 am

Why is BND going down?

Post by bugleheadd »

[Merged into ongoing discussion -- mod oldcomputerguy]

why did BND pop? it was at over 89, now back under 84 (actuall went to 76 earlier). i thought interest rates were trending down, so price should go up?
Starfox
Posts: 159
Joined: Thu Feb 06, 2020 7:28 pm
Location: Caribbean

Re: Why is BND going down?

Post by Starfox »

......
Last edited by Starfox on Mon Nov 09, 2020 4:38 pm, edited 1 time in total.
User avatar
Ketawa
Posts: 2309
Joined: Mon Aug 22, 2011 1:11 am
Location: DC

Re: Why is BND going down?

Post by Ketawa »

bugleheadd wrote: Thu Mar 12, 2020 9:59 am why did BND pop? it was at over 89, now back under 84 (actuall went to 76 earlier). i thought interest rates were trending down, so price should go up?
Treasury rates are mostly slightly down today, so Treasury funds are slightly up for the most part.

VGSH
VGIT
VGLT
EDV - slightly down

Corporate bonds are down today.

VCSH
VCIT
VCLT
VTC

Corporate bonds have credit risk, which is correlated with market beta in equities. BND has both Treasuries and corporate bonds. Corporate bonds are down more than Treasuries are up.
Elysium
Posts: 3223
Joined: Mon Apr 02, 2007 6:22 pm

Re: Total Bond Market Down >4%

Post by Elysium »

Moochy wrote: Thu Mar 12, 2020 9:38 am
stocknoob4111 wrote: Thu Mar 12, 2020 9:28 am
CheckMate404 wrote: Thu Mar 12, 2020 9:23 am If bond prices are down, that means yield just went up.
Yields did not go up, infact they are DOWN sharply. Bonds are selling off for other reasons - perhaps redemptions, perhaps due to the BB and BBB debt in their holdings that are preceived as a default risk. It isn't interest rate related because interest rates fell today sharply. TNX is down 19%, bonds SHOULD be up sharply instead they are selling off.

This is an example of why NOT to hold these Bond funds which hold all this corporate debt.

This is exactly why corporate bond funds are down. Those etf's/mutual funds holding BBB bonds are likely going to find those bonds downgraded to real junk. Some corporate issuers are going to face difficulty paying interest on higher grade bonds going forward also.
I would change that slightly to say market is expecting extreme bearish outlook and pricing in for unknown amount of defaults / downgrades.

It is impossible to factor in panic selling that there is any real understanding here about future downgrades and defaults. Some of those companies may go junk and some may go belly up. We simply don't know, so everything is getting painted with broad brush. Eventually when real data comes in after a quarter or two, market will price that in, and it is very unlikely today's price is going to be the right price. It will be better than what the market expects today, likely that the defaults may be less than 0.2%, in that case everything will recover back above comparable Government paper.
drk
Posts: 1926
Joined: Mon Jul 24, 2017 10:33 pm
Location: AWOL

Re: Why is BND going down?

Post by drk »

Starfox wrote: Thu Mar 12, 2020 10:01 am VTEB which is intermediate term muni with 5 year duration, is down 6% today. :|
Yeah, I've been pretty relaxed about all of this, but seeing MUB down over 5% this morning gave me a small panic.
Topic Author
mrwalken
Posts: 175
Joined: Sat Oct 08, 2011 5:51 pm

Re: Total Bond Market Down >4%

Post by mrwalken »

BoggledHead2 wrote: Thu Mar 12, 2020 9:41 am
mrwalken wrote: Thu Mar 12, 2020 9:18 am Does this validate the viewpoint that has been expressed by some here that the potential (paltry) returns from bonds at present do not justify the risk? Better to stick with risk-free fixed assets (CDs, high yield savings accounts, IBonds, etc)?
I honestly have no idea why anyone would buy bonds

At no point will my “safe” portion of portfolio be in something that is still volatile and can experience these declines

CD ladders and HYS accounts for me
Bonds are justified when they offer potential returns to compensate for the risk. But in the current environment there is no hope of significant returns. So all you get is return-free risk.
User avatar
22twain
Posts: 2585
Joined: Thu May 10, 2012 5:42 pm

Re: Total Bond Market Down >4%

Post by 22twain »

Just to put things in perspective, Total Bond Market has now dropped aaaaallllll the way back... to the level it was at during last fall (late August onwards).

Last week I sold some of mine while it was rising, about a year's worth of expenses, and put it in my money market fund. It won't earn much there, but at least it won't drop (except for withdrawals, of course). I shouldn't need to sell anything else until next spring, by which time things will hopefully have settled down / bottomed out.
Help save endangered words! When you write "princiPLE", make sure you don't really mean "princiPAL"!
Starfox
Posts: 159
Joined: Thu Feb 06, 2020 7:28 pm
Location: Caribbean

Re: Why is BND going down?

Post by Starfox »

......
Last edited by Starfox on Mon Nov 09, 2020 4:35 pm, edited 1 time in total.
User avatar
watchnerd
Posts: 5981
Joined: Sat Mar 03, 2007 11:18 am
Location: Seattle, WA, USA

Re: Why is BND going down?

Post by watchnerd »

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).
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP
veggivet
Posts: 809
Joined: Sun Jan 25, 2015 1:07 pm
Location: New England

Re: Why is BND going down?

Post by veggivet »

Nowhere to hide today...
If you watch your pennies, your dollars will take care of themselves.
sixtyforty
Posts: 503
Joined: Tue Nov 25, 2014 12:22 pm
Location: USA

Re: Why is BND going down?

Post by sixtyforty »

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.
"Simplicity is the ultimate sophistication" - Leonardo Da Vinci
GAAP
Posts: 1154
Joined: Fri Apr 08, 2016 12:41 pm

Re: Why is BND going down?

Post by GAAP »

"Down" is relative...

Just checked, VTI is down 8.33%, BND is down 1.90%.

5 years of that would take the 100% stock portfolio down to ~65%, and the 100% bond portfolio down to ~91%. Evaluating long-term investment choices based upon intra-day drops is not effective.
“Adapt what is useful, reject what is useless, and add what is specifically your own.” ― Bruce Lee
JackoC
Posts: 1833
Joined: Sun Aug 12, 2018 11:14 am

Re: Total Bond Market Down >4%

Post by JackoC »

Some of the drop in bond ETF's is probably also sudden discount to NAV. For example the Vanguard treasury only ETF's are also down, not just the total market and muni market ones which have more credit risk than treasuries. For example a minute ago the VGLT long term treasury ETF was down ~0.7%, the ZB long treasury futures up over 1%. Both with very wide bid-offer compared to normal, bond market seizing up a bit.
babystep
Posts: 245
Joined: Tue Apr 09, 2019 9:44 am

bonds and stocks both down

Post by babystep »

[Merged into ongoing discussion -- mod oldcomputerguy]

Today March 12:

BND / Vanguard Total Bond Market is down 1.5%.
VTEB / Vanguard muni tax exempt is down by 5%.
VTI / Vanguard Total Stock Market Index is down by 8%.

Why did bonds go down along with stocks ? Why did VTEB go down way more ?
Last edited by babystep on Thu Mar 12, 2020 11:21 am, edited 1 time in total.
atdharris
Posts: 646
Joined: Wed Jan 02, 2019 3:18 pm

Re: bond and stocks both down

Post by atdharris »

BND holds corporate paper, so it is susceptible to dropping during market sell offs. My treasury ETF is holding up.
User avatar
watchnerd
Posts: 5981
Joined: Sat Mar 03, 2007 11:18 am
Location: Seattle, WA, USA

Re: Why is BND going down?

Post by watchnerd »

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.
Treasuries do better than TBM in bear markets.

I'm not sure why BHers continue to love TBM.
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP
stocknoob4111
Posts: 1578
Joined: Sun Jan 07, 2018 12:52 pm

Re: Why is BND going down?

Post by stocknoob4111 »

answered in the other thread - BBB rated corporate debt is tanking bad and BND holds some of it. This is indeed disappointing but unfortunately unless you own pure US Treasuries this is the risk.
User avatar
mrspock
Posts: 1319
Joined: Tue Feb 13, 2018 2:49 am
Location: Vulcan

Re: Total Bond Market Down >4%

Post by mrspock »

JackoC wrote: Thu Mar 12, 2020 11:05 am Some of the drop in bond ETF's is probably also sudden discount to NAV. For example the Vanguard treasury only ETF's are also down, not just the total market and muni market ones which have more credit risk than treasuries. For example a minute ago the VGLT long term treasury ETF was down ~0.7%, the ZB long treasury futures up over 1%. Both with very wide bid-offer compared to normal, bond market seizing up a bit.
That's what I noticed as well, ETF bond fund prices (MUB, VTEB) have become unglued to their NAVs. A bit unfortunate when the time comes to rebalance, but it's also why I hold 3 muni funds, 2 of which are holding up reasonably well (VCAIX, VWITX).

On the bright side, yields are up! :D
User avatar
willthrill81
Posts: 21280
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Why is BND going down?

Post by willthrill81 »

watchnerd wrote: Thu Mar 12, 2020 11:23 am
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.
Treasuries do better than TBM in bear markets.

I'm not sure why BHers continue to love TBM.
I don't know why either. Intermediate-term Treasuries seem like a better 'default' option to me. I think that the world 'total' may be part of BH's bias toward TBM. There's also a pretty widespread view that more securities are always better, even if the added securities are notably different.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
User avatar
watchnerd
Posts: 5981
Joined: Sat Mar 03, 2007 11:18 am
Location: Seattle, WA, USA

Re: Why is BND going down?

Post by watchnerd »

willthrill81 wrote: Thu Mar 12, 2020 11:32 am
watchnerd wrote: Thu Mar 12, 2020 11:23 am
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.
Treasuries do better than TBM in bear markets.

I'm not sure why BHers continue to love TBM.
I don't know why either. Intermediate-term Treasuries seem like a better 'default' option to me. I think that the world 'total' may be part of BH's bias toward TBM. There's also a pretty widespread view that more securities are always better, even if the added securities are notably different.

I bet if Vanguard made a "Total Treasuries Market" bond fund (like GOVT), it would sell well.
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP
User avatar
firebirdparts
Posts: 1872
Joined: Thu Jun 13, 2019 4:21 pm

Re: Total Bond Market Down >4%

Post by firebirdparts »

silent_john wrote: Thu Mar 12, 2020 9:24 am I would have liked to rebalance into stocks...not with my TBM fund down over 4%. RIP. :oops:
This is the part where you have to decide what "down" means. If it goes up 10% and down 4%, is that okay? It's up quite nicely year to date, I mean unless you think it's down. You can decide.
Last edited by firebirdparts on Thu Mar 12, 2020 11:42 am, edited 1 time in total.
A fool and your money are soon partners
User avatar
zonto
Posts: 223
Joined: Tue Aug 24, 2010 3:45 pm
Location: Boston, MA

Re: Why is BND going down?

Post by zonto »

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).
There is more happening within the bond markets this week. The Treasury market especially is facing potential liquidity concerns, which are throwing bid/ask spreads out of whack. Seems today that the lower the volume of the ETF, the worse this problem is intraday.

At 12:35 ET:
  • EDV (Vanguard Extended Duration Treasury Index) is down 2.01%. Volume 502,909. Avg. Volume 281,006.
  • ZROZ (PIMCO 25+ year zero coupon UST Index) is down 1.58%. Volume 5,055,243. Avg. volume 4,460,129.
  • VGLT (Vanguard Long-Term Treasury Index) is down 0.65%. Volume 743,130. Avg. Volume 422,767.
  • IEF (iShares 7-10 year Treasury index) is UP 1.25%. Volume 4,481,108. Avg. Volume 5,387,065.
  • TLT (iShares 20+ year Treasury index) is UP 1.52%. Volume 8,646,131. Avg. Volume 14,097,501.
EDV and ZROZ should track pretty closely. And VGLT should be right between IEF and TLT. So something is obviously up today.

As I type this, ZROZ is down 0.17% and EDV is still down 1.83%. Makes no sense to me.

Found this today: https://markets.businessinsider.com/new ... 1028990368
Last edited by zonto on Thu Mar 12, 2020 11:56 am, edited 2 times in total.
"For real-world portfolios, the main impact of diversification is to narrow the dispersion of outcomes. [T]he most important impact is to make the worst outcomes less bad." (Vineviz)
User avatar
willthrill81
Posts: 21280
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Why is BND going down?

Post by willthrill81 »

watchnerd wrote: Thu Mar 12, 2020 11:35 am
willthrill81 wrote: Thu Mar 12, 2020 11:32 am
watchnerd wrote: Thu Mar 12, 2020 11:23 am
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.
Treasuries do better than TBM in bear markets.

I'm not sure why BHers continue to love TBM.
I don't know why either. Intermediate-term Treasuries seem like a better 'default' option to me. I think that the world 'total' may be part of BH's bias toward TBM. There's also a pretty widespread view that more securities are always better, even if the added securities are notably different.
I bet if Vanguard made a "Total Treasuries Market" bond fund (like GOVT), it would sell well.
Probably. It would make more sense to me for portfolios otherwise heavy in stocks.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
User avatar
vineviz
Posts: 7982
Joined: Tue May 15, 2018 1:55 pm

Re: Why is BND going down?

Post by vineviz »

willthrill81 wrote: Thu Mar 12, 2020 11:44 am
watchnerd wrote: Thu Mar 12, 2020 11:35 am
willthrill81 wrote: Thu Mar 12, 2020 11:32 am
watchnerd wrote: Thu Mar 12, 2020 11:23 am
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.
Treasuries do better than TBM in bear markets.

I'm not sure why BHers continue to love TBM.
I don't know why either. Intermediate-term Treasuries seem like a better 'default' option to me. I think that the world 'total' may be part of BH's bias toward TBM. There's also a pretty widespread view that more securities are always better, even if the added securities are notably different.
I bet if Vanguard made a "Total Treasuries Market" bond fund (like GOVT), it would sell well.
Probably. It would make more sense to me for portfolios otherwise heavy in stocks.
I think the only market for a “Total Treasury Market” fund are the perpetually indecisive and/or confused. For every else, one of the existing targeted duration Treasury ETFs should be more than sufficient don’t you think?
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
User avatar
watchnerd
Posts: 5981
Joined: Sat Mar 03, 2007 11:18 am
Location: Seattle, WA, USA

Re: Why is BND going down?

Post by watchnerd »

vineviz wrote: Thu Mar 12, 2020 11:49 am
I think the only market for a “Total Treasury Market” fund are the perpetually indecisive and/or confused. For every else, one of the existing targeted duration Treasury ETFs should be more than sufficient don’t you think?
Indecisive and/or confused buyers is a very large market.

That's the appeal of a total market offering -- it's perfect for the indecisive.

Happy Meals and Mexican combo plates sell well -- all in one for the indecisive.
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP
ARoseByAnyOtherName
Posts: 1000
Joined: Wed Apr 26, 2017 12:03 am

Re: Total Bond Market Down >4%

Post by ARoseByAnyOtherName »

Troubles Percolate in the Plumbing of Wall Street
Even Treasury bonds were hard to trade Wednesday, and funding markets have shown hints of strain. Investors are looking to the Fed.

Conditions in bond markets had been growing dicier all week, but Wednesday afternoon was a tipping point: Investors across Wall Street reported that Treasury bills and bonds were becoming hard to trade.

Yields swung wildly. There were few sellers and buyers for older bonds, and a huge gap between what they were asking for and offering. And while it was difficult to point to the root cause of the sudden lack of liquidity — the ability to buy and sell securities at a reasonable value — calls for help were widespread.

“Liquidity conditions in the Treasury market look troublingly poor” and “repo markets are now showing signs of serious strain,” economists at Evercore ISI wrote in a research note. “We think the Fed needs to act now.”
https://www.nytimes.com/2020/03/12/busi ... s-fed.html
User avatar
Kenkat
Posts: 6723
Joined: Thu Mar 01, 2007 11:18 am
Location: Cincinnati, OH

Re: Why is BND going down?

Post by Kenkat »

watchnerd wrote: Thu Mar 12, 2020 11:23 am
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.
Treasuries do better than TBM in bear markets.

I'm not sure why BHers continue to love TBM.
Corporates do better than TBM (and treasuries) in normal markets. Since we don’t know what is coming, TBM positions you for both.
mickroark
Posts: 121
Joined: Wed Jan 13, 2016 10:35 am

Re: Total Bond Market Down >4%

Post by mickroark »

Margin calls, Gold is down 4% also. :annoyed
User avatar
powermega
Posts: 1179
Joined: Fri May 16, 2014 12:07 am
Location: Colorado

Re: Total Bond Market Down >4%

Post by powermega »

I remember Bogleheads like Larry Swedroe making the case that intermediate treasuries are a better bond allocation than the total bond market. It's during times like these that it's easy to understand his point. Corporate bonds have a higher correlation to the stock market than treasuries. Treasuries also don't have Credit Risk or Call Risk either.
Even a stopped clock is right twice a day.
User avatar
zonto
Posts: 223
Joined: Tue Aug 24, 2010 3:45 pm
Location: Boston, MA

Re: Total Bond Market Down >4%

Post by zonto »

Building on the liquidity point above, the Fed just announced: https://www.cnbc.com/2020/03/12/fed-to- ... hases.html. "These changes are being made to address highly unusual disruptions in Treasury financing markets associated with the coronavirus outbreak."
"For real-world portfolios, the main impact of diversification is to narrow the dispersion of outcomes. [T]he most important impact is to make the worst outcomes less bad." (Vineviz)
User avatar
watchnerd
Posts: 5981
Joined: Sat Mar 03, 2007 11:18 am
Location: Seattle, WA, USA

Re: Why is BND going down?

Post by watchnerd »

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.
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP
DB2
Posts: 928
Joined: Thu Jan 17, 2019 10:07 pm

Re: Why is BND going down?

Post by DB2 »

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.
Agreed.
pascalwager
Posts: 1869
Joined: Mon Oct 31, 2011 8:36 pm

Re: Total Bond Market Down >4%

Post by pascalwager »

TBM is included in Bill Sharpe's Risk Portfolio. For safety, he hold's TIPs on the side.
User avatar
watchnerd
Posts: 5981
Joined: Sat Mar 03, 2007 11:18 am
Location: Seattle, WA, USA

Re: Total Bond Market Down >4%

Post by watchnerd »

pascalwager wrote: Thu Mar 12, 2020 12:41 pm TBM is included in Bill Sharpe's Risk Portfolio. For safety, he hold's TIPs on the side.
Right -- it's on the risky side of the fence with equities.
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP
Post Reply