am wrote: ↑
Sat Mar 21, 2020 4:07 pm
ImmigrantSaver wrote: ↑
Fri Mar 20, 2020 10:13 pm
VMLUX is performing much worse than I expected. Thinking of taking the loss and switching to VUSXX. It my house downpayment with flexible timeline money
VVMLUX has been such a steady calm fund over the years I’ve followed. The interm, fund as well. But the recent losses, like yesterday of 2.5% are disappointing. It’s only during a crisis that all the hidden risks start showing up.
~5.1% price (not including interest income) loss YTD v 8.0% for VWIUX and 12.4% for the VTEB ETF (which includes a discount to NAV), per Yahoo Fiance chart. I agree, unsettling, not that anyone can say this was 'gteed' never to happen, but in the safer part of the portfolio a given erosion is more disturbing, to me anyway (my VMLUX holding is around 30% of 'safe' money, rest mainly savings accounts, CD's, TIPS/I-bonds). In terms of credit it somewhat makes sense that it hasn't done quite as much better than longer funds as duration would imply. The possibility of higher default rates is probably concentrated in relatively near term. The underlying muni curve is now inverted, see:
https://www.bloomberg.com/markets/rates ... t-bonds/us
At some point it's no longer a question 'high grade muni's have hardly ever defaulted', but rather you recognize this time could indeed be different. But, some defaults, and credit losses amounting to a large % of a fund are still quite different scenario's. Not even including the tax advantage 2 yr muni's per the page above (VMLUX is around 3 avg state mat IIRC) yield 2.80%, v the 2 yr note around 0.34%. (published SEC yld of the fund is completely out of date). That covers a fair amount of defaults, a lot by past muni stds, ~4%/yr (using traditional 40% recovery avg for corp bonds), 12% of issuers over a typical 3 yr bond's life, all in rough terms. Nobody knows the 'worst case' though, ever.