Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

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squirm
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by squirm »

Corsair wrote: Sun Mar 15, 2020 4:27 pm Should I be selling out of bonds and putting more towards my mortgage?

Could they go negative rates Wed during FOMC?
Maybe the fed will buy your bonds and mortgage.
sabtastic
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Re: Federal Reserve just cuts rates to zero. Do you think the worst is over?

Post by sabtastic »

My guess is in the short run, deflation. In the long run, inflation. Best to be as diversified as you can. Absolutely no one has any idea what is coming.
veggivet
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by veggivet »

Phew! Now that rates are down to 0%, we can all go back to our normal daily schedules. All sports arenas, theaters, casinos, churches, etc. will be open before you can say "negative interest rates"! Thanks, Jay!
If you watch your pennies, your dollars will take care of themselves.
squirm
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by squirm »

Triple digit golfer wrote: Sun Mar 15, 2020 4:32 pm Somebody help me understand. What will this do to bond fund income? I'm not talking about NAV/price appreciation, but income. Can they actually have a negative income return? I think no. Wasn't the rate close to zero in 2008 and beyond, yet bond income returns were still 2-4%.
This is the fed fund rates at zero.
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Re: Federal Reserve just cuts rates to zero. Do you think the worst is over?

Post by Seasonal »

KlangFool wrote: Sun Mar 15, 2020 4:20 pm Folks,

If the interest rate goes down to negative, does that mean we have deflation? If that is true, won't CASH be earning a good return?

KlangFool
No. Deflation is a general decrease in prices. Lower interest rates are designed to increase economic activity which could forestall deflation.

Whether it will succeed is not yet known.
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Watty
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by Watty »

Corsair wrote: Sun Mar 15, 2020 4:27 pm Should I be selling out of bonds and putting more towards my mortgage?
That would be a good question to ask in a separate thread using this suggested format as a guideline.

viewtopic.php?f=1&t=6212
BionicBillWalsh
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Re: Federal Reserve just cuts rates to zero. Do you think the worst is over?

Post by BionicBillWalsh »

Well, for anyone that worried that they missed out an a market buying opportunity...you can unburden yourself from that fear.
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squirm
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by squirm »

veggivet wrote: Sun Mar 15, 2020 4:33 pm Phew! Now that rates are down to 0%, we can all go back to our normal daily schedules. All sports arenas, theaters, casinos, churches, etc. will be open before you can say "negative interest rates"! Thanks, Jay!
QE5 is lethal against the covid virus. I thought that was common knowledge.
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willthrill81
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by willthrill81 »

Triple digit golfer wrote: Sun Mar 15, 2020 4:32 pm Somebody help me understand. What will this do to bond fund income? I'm not talking about NAV/price appreciation, but income. Can they actually have a negative income return? I think no. Wasn't the rate close to zero in 2008 and beyond, yet bond income returns were still 2-4%.
Bond yields will almost certainly drop further.

Real yields are various bond classes were already negative. This will push them further into negative territory.

This is bad, bad juju.
“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
CodeMaster
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by CodeMaster »

JAZZISCOOL wrote: Sun Mar 15, 2020 4:18 pm Global stock futures are up across the board 3:17 pm MT. SP500 E-mini +8%
what site do you use to see that? :sharebeer
columbia
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by columbia »

The large chunk of money I have in TIAA Traditional churning away at 4.25% is looking good; it shall be interesting how far low the current vintage goes (and if/when they start lowering the older ones).
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Re: Federal Reserve just cuts rates to zero. Do you think the worst is over?

Post by jdilla1107 »

KlangFool wrote: Sun Mar 15, 2020 4:20 pm Folks,

If the interest rate goes down to negative, does that mean we have deflation? If that is true, won't CASH be earning a good return?

KlangFool
Deflation really has nothing to do with interest rates. Deflation means that prices in the economy and demand for products are decreasing.

You can have negative interest rates with inflation. To an investor, these are pretty similar if you set aside the money illusion.

Interest Rates at: 2%
Inflation at: 4%

and

Interest Rates at: -1%
Inflation at: 1%
squirm
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by squirm »

CodeMaster wrote: Sun Mar 15, 2020 4:35 pm
JAZZISCOOL wrote: Sun Mar 15, 2020 4:18 pm Global stock futures are up across the board 3:17 pm MT. SP500 E-mini +8%
what site do you use to see that? :sharebeer
No their not. Wait an hour and see where futures are.
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willthrill81
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Re: Federal Reserve just cuts rates to zero. Do you think the worst is over?

Post by willthrill81 »

Seasonal wrote: Sun Mar 15, 2020 4:34 pm No. Deflation is a general decrease in prices. Lower interest rates are designed to increase economic activity which could forestall deflation.

Whether it will succeed is not yet known.
I have grave doubts as to whether they will. Businesses aren't going to even think about expanding anything (except maybe consumer staples) for months at least. Even lower interest rates aren't going to encourage consumers to get outside their homes as long as they're afraid of the virus.

Bottom line: the Fed is panicked and impotent, at least with the tools they've been using so far.
“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
JD2775
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by JD2775 »

Can someone explain what this means, in layman's terms? I honestly don't follow these kinds of things...

Thanks in advance
guyinlaw
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by guyinlaw »

Corsair wrote: Sun Mar 15, 2020 4:27 pm Should I be selling out of bonds and putting more towards my mortgage?
Why would you want to pay more of your mortgage? Maybe refinance in the coming days..

Yes, more cash, maybe buy gold..
Time is your friend; impulse is your enemy. - John C. Bogle
Triple digit golfer
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by Triple digit golfer »

willthrill81 wrote: Sun Mar 15, 2020 4:35 pm
Triple digit golfer wrote: Sun Mar 15, 2020 4:32 pm Somebody help me understand. What will this do to bond fund income? I'm not talking about NAV/price appreciation, but income. Can they actually have a negative income return? I think no. Wasn't the rate close to zero in 2008 and beyond, yet bond income returns were still 2-4%.
Bond yields will almost certainly drop further.

Real yields are various bond classes were already negative. This will push them further into negative territory.

This is bad, bad juju.
That's what I thought.

So where does one put their "safe" money? Just accept crappy yields?
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JAZZISCOOL
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by JAZZISCOOL »

guyinlaw wrote: Sun Mar 15, 2020 4:25 pm
JAZZISCOOL wrote: Sun Mar 15, 2020 4:18 pm Global stock futures are up across the board 3:17 pm MT. SP500 E-mini +8%
That is Friday increase.. None of the futures start trading till 6PM EST Sunday.

It is 6:25 AM in Tokyo. New Zealand exchange is open and is down 1.4% (NZX 50 index)
Thanks for the correction; I thought Schwab's future page was updated. :shock:
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by willthrill81 »

Triple digit golfer wrote: Sun Mar 15, 2020 4:38 pm
willthrill81 wrote: Sun Mar 15, 2020 4:35 pm
Triple digit golfer wrote: Sun Mar 15, 2020 4:32 pm Somebody help me understand. What will this do to bond fund income? I'm not talking about NAV/price appreciation, but income. Can they actually have a negative income return? I think no. Wasn't the rate close to zero in 2008 and beyond, yet bond income returns were still 2-4%.
Bond yields will almost certainly drop further.

Real yields are various bond classes were already negative. This will push them further into negative territory.

This is bad, bad juju.
That's what I thought.

So where does one put their "safe" money? Just accept crappy yields?
High-yield savings accounts and CDs are a good choice I'd say. Anything that isn't FDIC insured is at some kind of real risk right now.

I'd be leery of money market accounts right now. Remember what happened to them during the GFC?
Last edited by willthrill81 on Sun Mar 15, 2020 4:40 pm, edited 1 time in total.
“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
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by drk »

JAZZISCOOL wrote: Sun Mar 15, 2020 4:39 pm Thanks for the correction; I thought Schwab's future page was updated. :shock:
It is updated. The issue is that futures markets don't open until 6 pm ET, so there haven't been any updates to incorporate since Friday evening.
Seasonal
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Re: Federal Reserve just cuts rates to zero. Do you think the worst is over?

Post by Seasonal »

willthrill81 wrote: Sun Mar 15, 2020 4:37 pm
Seasonal wrote: Sun Mar 15, 2020 4:34 pm No. Deflation is a general decrease in prices. Lower interest rates are designed to increase economic activity which could forestall deflation.

Whether it will succeed is not yet known.
I have grave doubts as to whether they will. Businesses aren't going to even think about expanding anything (except maybe consumer staples) for months at least. Even lower interest rates aren't going to encourage consumers to get outside their homes as long as they're afraid of the virus.

Bottom line: the Fed is panicked and impotent, at least with the tools they've been using so far.
Doing nothing would likely bring the Fed's policy rate above market rates, in other words, tightening and the Fed effectively tightening would not be a good thing under the circumstances. It may not help much (we shall see) but it would be good to avoid making a bad situation worse.
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by veggivet »

"Safe" money probably better off in your mattress than in the bank.
If you watch your pennies, your dollars will take care of themselves.
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by rascott »

blueleaf wrote: Sun Mar 15, 2020 4:17 pm
Pawpatrol wrote: Sun Mar 15, 2020 4:14 pm Seems like the asset class most protected by this is real estate? Mortgage rates will fall more and that will halt foreclosures and seems inflation may show up in housing while deflation in goods/services?
Knowledgeable bogleheads; do you expect mortgage rates to fall as a result?

Mortgage market is currently a mess. Rates won't be dropping there for a while.
PeterSteele
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by PeterSteele »

Any idea what this will do to existing bond holdings? I am 100% VAIPX as of two months ago and I've nearly lost 6% over the past week. I don't want to sell at a loss but I've never seen such steep drop in a bond fund. Thanks
manatee2005
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by manatee2005 »

willthrill81 wrote: Sun Mar 15, 2020 4:20 pm The problem the globe is grappling with is not a financial one. Finances are the tail. The dog is all of the people being infected, unable to go to work for weeks, and all of the people dying.

The Federal Reserve cannot solve this problem.
Yeah, we need people to solve this problem. Social distancing.

Also doctors who are working on the vaccine.
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Re: Federal Reserve just cuts rates to zero. Do you think the worst is over?

Post by willthrill81 »

Seasonal wrote: Sun Mar 15, 2020 4:40 pm
willthrill81 wrote: Sun Mar 15, 2020 4:37 pm
Seasonal wrote: Sun Mar 15, 2020 4:34 pm No. Deflation is a general decrease in prices. Lower interest rates are designed to increase economic activity which could forestall deflation.

Whether it will succeed is not yet known.
I have grave doubts as to whether they will. Businesses aren't going to even think about expanding anything (except maybe consumer staples) for months at least. Even lower interest rates aren't going to encourage consumers to get outside their homes as long as they're afraid of the virus.

Bottom line: the Fed is panicked and impotent, at least with the tools they've been using so far.
Doing nothing would likely bring the Fed's policy rate above market rates, in other words, tightening and the Fed effectively tightening would not be a good thing under the circumstances.
I'm not saying that the Fed should have done nothing, but I don't think that they can do much to help right now.
“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
Triple digit golfer
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by Triple digit golfer »

willthrill81 wrote: Sun Mar 15, 2020 4:39 pm
Triple digit golfer wrote: Sun Mar 15, 2020 4:38 pm
willthrill81 wrote: Sun Mar 15, 2020 4:35 pm
Triple digit golfer wrote: Sun Mar 15, 2020 4:32 pm Somebody help me understand. What will this do to bond fund income? I'm not talking about NAV/price appreciation, but income. Can they actually have a negative income return? I think no. Wasn't the rate close to zero in 2008 and beyond, yet bond income returns were still 2-4%.
Bond yields will almost certainly drop further.

Real yields are various bond classes were already negative. This will push them further into negative territory.

This is bad, bad juju.
That's what I thought.

So where does one put their "safe" money? Just accept crappy yields?
High-yield savings accounts and CDs are a good choice I'd say. Anything that isn't FDIC insured is at some kind of real risk right now.

I'd be leery of money market accounts right now. Remember what happened to them during the GFC?
Yep, sure so. Lost a few percent.

No bonds at all? Total Bond is now suddenly not a wise investment?
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by squirm »

JD2775 wrote: Sun Mar 15, 2020 4:38 pm Can someone explain what this means, in layman's terms? I honestly don't follow these kinds of things...

Thanks in advance
It means the fed is trying to flatten the interest rate curve. New mortgages rates should fall since they will buy mortgage bonds now. You might want to refi if it makes since. Maybe we'll get negative rates, Greenspan said it's possible.

All this doesn't mean much as rates were already low across the spectrum. Going negative would be a first.
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by manatee2005 »

PeterSteele wrote: Sun Mar 15, 2020 4:41 pm Any idea what this will do to existing bond holdings? I am 100% VAIPX as of two months ago and I've nearly lost 6% over the past week. I don't want to sell at a loss but I've never seen such steep drop in a bond fund. Thanks
Don’t worry.
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by JHU ALmuni »

JAZZISCOOL wrote: Sun Mar 15, 2020 4:18 pm Correction - removed global stock futures post. Schwab's future trading page were STALE figures and not updated. Please disregard and look at your broker's live future and stock trading.

Things are moving very quickly right now.
What site are you using?
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by willthrill81 »

PeterSteele wrote: Sun Mar 15, 2020 4:41 pm Any idea what this will do to existing bond holdings? I am 100% VAIPX as of two months ago and I've nearly lost 6% over the past week. I don't want to sell at a loss but I've never seen such steep drop in a bond fund. Thanks
The principal value of bonds will go up, and yields will go down.
“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
squirm
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by squirm »

I'd be leery of anything junk and BBB-.
Seasonal
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by Seasonal »

JD2775 wrote: Sun Mar 15, 2020 4:38 pm Can someone explain what this means, in layman's terms? I honestly don't follow these kinds of things...

Thanks in advance
See prior posts in this thread. I tried at viewtopic.php?p=5097970#p5097970
wootwoot
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by wootwoot »

willthrill81 wrote: Sun Mar 15, 2020 4:42 pm
PeterSteele wrote: Sun Mar 15, 2020 4:41 pm Any idea what this will do to existing bond holdings? I am 100% VAIPX as of two months ago and I've nearly lost 6% over the past week. I don't want to sell at a loss but I've never seen such steep drop in a bond fund. Thanks
The principal value of bonds will go up, and yields will go down.
Go bonds go!
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by veggivet »

Does anybody else have the impression that we're just throwing spaghetti at the wall to see what sticks and what doesn't?
If you watch your pennies, your dollars will take care of themselves.
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willthrill81
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by willthrill81 »

Triple digit golfer wrote: Sun Mar 15, 2020 4:41 pm
willthrill81 wrote: Sun Mar 15, 2020 4:39 pm
Triple digit golfer wrote: Sun Mar 15, 2020 4:38 pm
willthrill81 wrote: Sun Mar 15, 2020 4:35 pm
Triple digit golfer wrote: Sun Mar 15, 2020 4:32 pm Somebody help me understand. What will this do to bond fund income? I'm not talking about NAV/price appreciation, but income. Can they actually have a negative income return? I think no. Wasn't the rate close to zero in 2008 and beyond, yet bond income returns were still 2-4%.
Bond yields will almost certainly drop further.

Real yields are various bond classes were already negative. This will push them further into negative territory.

This is bad, bad juju.
That's what I thought.

So where does one put their "safe" money? Just accept crappy yields?
High-yield savings accounts and CDs are a good choice I'd say. Anything that isn't FDIC insured is at some kind of real risk right now.

I'd be leery of money market accounts right now. Remember what happened to them during the GFC?
Yep, sure so. Lost a few percent.

No bonds at all? Total Bond is now suddenly not a wise investment?
I'm on record often saying that I don't like TBM due to its exposure to corporate bonds. I'm a 'take risk on the equity side' kind of guy. Also, intermediate-term bonds may not be appropriate for all investors.
“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
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by JAZZISCOOL »

JHU ALmuni wrote: Sun Mar 15, 2020 4:42 pm
JAZZISCOOL wrote: Sun Mar 15, 2020 4:18 pm Correction - removed global stock futures post. Schwab's future trading page were STALE figures and not updated. Please disregard and look at your broker's live future and stock trading.

Things are moving very quickly right now.
What site are you using?
Schwab - their futures were NOT UPDATED. :!:
squirm
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by squirm »

When you go from 1.25 to zero, it's really not much. It's now like going from 6 to 2.25 or something like that.
perikleez
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Re: Federal Reserve just cuts rates to zero. Do you think the worst is over?

Post by perikleez »

MotoTrojan wrote: Sun Mar 15, 2020 4:17 pm Nope. The Fed just proved that Friday's rally wasn't the beginning of the end of this bear.
agree. In fact, many are saying the 20% drop is officially sign we are in a bear market, i.e., recession slide.

my guess is that over next 6mos to end of year, we will see some Wall Street institutions fold, corporate bankruptcies, unemployment rise, and uncertain consumer confidence/investor sentiment. fact of the matter is that we have collectively slowed down this economy, coinciding with some other indicators suggesting market correction was overdue.

The end of the year (after Tue, Nov 3rd) will likley provide best opportunity to evaluate continued impact of COVID (second season?), market/economic status, global stability, and any government efforts to push GDP recovery and growth.
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by Seasonal »

wootwoot wrote: Sun Mar 15, 2020 4:43 pm
willthrill81 wrote: Sun Mar 15, 2020 4:42 pm
PeterSteele wrote: Sun Mar 15, 2020 4:41 pm Any idea what this will do to existing bond holdings? I am 100% VAIPX as of two months ago and I've nearly lost 6% over the past week. I don't want to sell at a loss but I've never seen such steep drop in a bond fund. Thanks
The principal value of bonds will go up, and yields will go down.
Go bonds go!
It is not good for the long-term bond holder to have yields go down, all else being equal.
squirm
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by squirm »

JAZZISCOOL wrote: Sun Mar 15, 2020 4:44 pm
JHU ALmuni wrote: Sun Mar 15, 2020 4:42 pm
JAZZISCOOL wrote: Sun Mar 15, 2020 4:18 pm Correction - removed global stock futures post. Schwab's future trading page were STALE figures and not updated. Please disregard and look at your broker's live future and stock trading.

Things are moving very quickly right now.
What site are you using?
Schwab - their futures were NOT UPDATED. :!:
Spread bets are -200 Dow Jones.
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by Munir »

Will anyone speculate what this Fed action means for different types of bond funds?
JD2775
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by JD2775 »

squirm wrote: Sun Mar 15, 2020 4:42 pm
JD2775 wrote: Sun Mar 15, 2020 4:38 pm Can someone explain what this means, in layman's terms? I honestly don't follow these kinds of things...

Thanks in advance
It means the fed is trying to flatten the interest rate curve. New mortgages rates should fall since they will buy mortgage bonds now. You might want to refi if it makes since. Maybe we'll get negative rates, Greenspan said it's possible.

All this doesn't mean much as rates were already low across the spectrum. Going negative would be a first.
Thanks. My taxable is 70/30 VTSAX/VBTLX. Should I stop bond contributions for a while? I am seeing a common theme on this thread that bonds = bad
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by willthrill81 »

veggivet wrote: Sun Mar 15, 2020 4:44 pm Does anybody else have the impression that we're just throwing spaghetti at the wall to see what sticks and what doesn't?
That's exactly what it looks like the Fed is doing.

All of this is unprecedented in modern history. It's been 102 years since we've seen anything remotely like this. The 'How to Deal with a Pandemic' playbook is being followed fairly well outside of the financial markets though.
“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
squirm
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Re: Federal Reserve just cuts rates to zero. Do you think the worst is over?

Post by squirm »

perikleez wrote: Sun Mar 15, 2020 4:45 pm
MotoTrojan wrote: Sun Mar 15, 2020 4:17 pm Nope. The Fed just proved that Friday's rally wasn't the beginning of the end of this bear.
agree. In fact, many are saying the 20% drop is officially sign we are in a bear market, i.e., recession slide.

my guess is that over next 6mos to end of year, we will see some Wall Street institutions fold, corporate bankruptcies, unemployment rise, and uncertain consumer confidence/investor sentiment. fact of the matter is that we have collectively slowed down this economy, coinciding with some other indicators suggesting market correction was overdue.

The end of the year (after Tue, Nov 3rd) will likley provide best opportunity to evaluate continued impact of COVID (second season?), market/economic status, global stability, and any government efforts to push GDP recovery and growth.
Corporate spreads are already indicating that. The biggest problem is the energy sector. Russia is playing for keeps.
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by stocknoob4111 »

It may induce even more panic in my opinion, the Fed has cut 1.5% now in a span of days... that is crazy!!! It's a sign that the Fed itself is panicking, not very confidence inspiring.
Last edited by stocknoob4111 on Sun Mar 15, 2020 4:50 pm, edited 1 time in total.
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SimpleGift
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by SimpleGift »

jjwpls wrote: Sun Mar 15, 2020 4:23 pm Would the Fed push rates into negative territory eventually?
At a press conference on September 18, 2019, Fed Chairman said in response to a question about negative interest rates:
Jerome Powell wrote:You mentioned negative interest rates. So negative interest rates is something that we looked at during the financial crisis and chose not to do. We chose to—after we got to the effective lower bound, we chose to do a lot of aggressive forward guidance and also large-scale asset purchases, and those were the two unconventional monetary policy tools that we used extensively. We feel that they worked fairly well. We did not use negative rates. And I think if we were to find ourselves at some future date again at the effective lower bound—again, not something we are expecting—then I think we would look at using large-scale asset purchases and forward guidance. I do not think we’d be looking at using negative rates. I just don’t think those will be at the top of our list.
Last edited by SimpleGift on Sun Mar 15, 2020 4:50 pm, edited 1 time in total.
Malingerer
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by Malingerer »

They are simply trying to avert the problems of the past, namely liquidity issues.
squirm
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by squirm »

JD2775 wrote: Sun Mar 15, 2020 4:47 pm
squirm wrote: Sun Mar 15, 2020 4:42 pm
JD2775 wrote: Sun Mar 15, 2020 4:38 pm Can someone explain what this means, in layman's terms? I honestly don't follow these kinds of things...

Thanks in advance
It means the fed is trying to flatten the interest rate curve. New mortgages rates should fall since they will buy mortgage bonds now. You might want to refi if it makes since. Maybe we'll get negative rates, Greenspan said it's possible.

All this doesn't mean much as rates were already low across the spectrum. Going negative would be a first.
Thanks. My taxable is 70/30 VTSAX/VBTLX. Should I stop bond contributions for a while? I am seeing a common theme on this thread that bonds = bad
Depends on the bonds. High yields, aka junk and BBB- stay away from, investment grade probably going to iffy. Government will increase in price but decrease in yield as fed does qe5.
mbasherp
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Re: Fed Slashes Rates to Fight Coronavirus Slowdown WSJ 3/15/20

Post by mbasherp »

In my opinion, this move is out of touch with the crisis. Taking actions like 2008 imply that this is a systemic crisis at its root. It is not. It’s an individual crisis and only becomes systemic if it trickles upstream.

They’d have been more effective giving $700 billion in cash to all American households. That would achieve something.

I’m more concerned after this announcement than before it. The Fed is totally out of touch with reality.
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