Who is buying bonds?

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adave
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Who is buying bonds?

Post by adave »

Currently 95% equity and 5% cash in MMF. Thinking about switching to 90% Equity and 10% BND, minimal cash.

Take a few chips off the table. BND provides some income also. BND seems out of favor but looks respectable to me.

I'm no expert however.
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familythriftmd
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Re: Who is buying bonds?

Post by familythriftmd »

adave wrote: Sun Feb 11, 2024 4:42 pm Currently 95% equity and 5% cash in MMF. Thinking about switching to 90% Equity and 10% BND, minimal cash.

Take a few chips off the table. BND provides some income also. BND seems out of favor but looks respectable to me.

I'm no expert however.
I use MMF to bolster my EF rather than using bonds.
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familythriftmd
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Re: Who is buying bonds?

Post by familythriftmd »

To add to the above, you could see that bonds in the short term CAN drop a bit, as seen in 2022, so I think of it more for stock kind-of-non-correlation than for EF equivalent.
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adave
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Re: Who is buying bonds?

Post by adave »

Rates have likely peaked however for this cycle. BND on sale.

If I were ever to consider bonds now would be a good time.

Staying 95% equity when managing a large portfolio might be unnecessary risk. But 90% equity is no joke as well.
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Hacksawdave
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Re: Who is buying bonds?

Post by Hacksawdave »

The per share distribution from bond funds has been moving higher for the last 18 months with VBTIX (Institutional class MF of BND) by over 34%. I still reinvest my 401k shares. I did add an additional $56K of CA tax-exempt longs VCLAX back on December 12th of last year to my existing position.
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Re: Who is buying bonds?

Post by Onlineid3089 »

I guess we buy some every other week via our target date funds in our 401k and 457b. :beer
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billthecat
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Re: Who is buying bonds?

Post by billthecat »

I buy some every two weeks through my pre-tax 401K contribution.
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Re: Who is buying bonds?

Post by Logan Roy »

adave wrote: Sun Feb 11, 2024 4:52 pm Rates have likely peaked however for this cycle. BND on sale.

If I were ever to consider bonds now would be a good time.

Staying 95% equity when managing a large portfolio might be unnecessary risk. But 90% equity is no joke as well.
It certainly seems likely, in terms of taming inflation for now .. But two things markets and economists are very bad at forecasting are rates and inflation.

Ray Dalio envisages a situation in which rates actually rise again – this would be down to a lot of debt needing refinancing, and investors selling debt when rates do fall .. This creates a supply/demand imbalance in which either rates have to rise to encourage buyers, or central banks have to print money to buy the debt, which potentially sparks more inflation. So he's selectively in equities, and cash. TIPS and real assets – I'd love to know what he thinks. But similar money managers are also big on them.
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Re: Who is buying bonds?

Post by TheRoundHeadedKid »

I don't try to predict anything about the stock and bond market because I am terrible at that compared to the pros. So I invest in every Vanguard ETFs equally. It turns out that is about a 20/80 bond/stock allocation.
All 86 Vanguard ETFs equally invested.
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Re: Who is buying bonds?

Post by DetroitRick »

This month and last month, yes. I've been re-balancing back to my intended bond allocation (from equity and cash) and also rearranging some of my fixed income holdings. After just getting a fee waiver, I shifted some things within the intermediate fixed income category (better choices, similar funds). At the same time, I've reduced a small portion of my individual Treasury holdings (mainly 1.5 years +) in favor of intermediate bond funds. Nothing real major, just normal maintenance.
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Re: Who is buying bonds?

Post by northfork »

Yeah, A few years ago I wrote down some portfolio size milestones that would trigger small adjustments towards a more conservative asset allocation. I hit the first milestone a few weeks ago and finally stopped dragging my feet and I moved from 80/20 to 75/25 on Friday.
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familythriftmd
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Re: Who is buying bonds?

Post by familythriftmd »

adave wrote: Sun Feb 11, 2024 4:52 pm Rates have likely peaked however for this cycle. BND on sale.

If I were ever to consider bonds now would be a good time.

Staying 95% equity when managing a large portfolio might be unnecessary risk. But 90% equity is no joke as well.
That sounds a little bit like market timing.

It sounds like maybe you are preferring to increase bond allocation above 10%, which would sound like a reasonable plan. 20% perhaps?
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Re: Who is buying bonds?

Post by goodenyou »

Like others have posted, in our target date funds in our 401k plans. The investments are about 40/60 stock/bond. So, we are buying.
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Topic Author
adave
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Re: Who is buying bonds?

Post by adave »

The issue is I make good W2 income (physician) and as of today am in decent health and relatively young (47 yo).

We live a nice lifestyle but below our means and are debt free for the last 10 years.

Thus, w2 income with bonus easily covers living expenses. Thus when I invest I am after long term capital gains. Income is not needed from bonds and are tax inefficient.
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Re: Who is buying bonds?

Post by UpperNwGuy »

I am buying intermediate-term bond ETFs every month.
AlwaysLearningMore
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Re: Who is buying bonds?

Post by AlwaysLearningMore »

adave wrote: Mon Feb 12, 2024 2:49 pm The issue is I make good W2 income (physician) and as of today am in decent health and relatively young (47 yo).

We live a nice lifestyle but below our means and are debt free for the last 10 years.

Thus, w2 income with bonus easily covers living expenses. Thus when I invest I am after long term capital gains. Income is not needed from bonds and are tax inefficient.
If you're after capital gains, perhaps bonds aren't the best place to look?
Outside of a qualified account broad market stock index funds are fairly tax efficient; have you exhausted that possibility?
If you're looking for bonds for a nonqualified account, what are your thoughts about municipal bonds?
Last edited by AlwaysLearningMore on Mon Feb 12, 2024 3:33 pm, edited 2 times in total.
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livesoft
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Re: Who is buying bonds?

Post by livesoft »

I had to rebalance today because of the spectacular gains in the past week. Sold some small-cap value and bought some BND. They call it "rebalancing."
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Re: Who is buying bonds?

Post by z3r0c00l »

adave wrote: Sun Feb 11, 2024 4:42 pm Currently 95% equity and 5% cash in MMF. Thinking about switching to 90% Equity and 10% BND, minimal cash.

Take a few chips off the table. BND provides some income also. BND seems out of favor but looks respectable to me.

I'm no expert however.
95/5 to 90/10 won't make a significant difference so it isn't worth the trouble to worry about. If you feel 90% is too risky, and I would agree that is the case for many, myself included, then you have to make real moves in AA to deal with that. At least 20% in bonds else it isn't going to do much.

BND has over $300 billion in assets, not counting the assets in similar mutual fund options at Vanguard alone. I would guess over a trillion if you count all of the intermediate, total bond type funds. That doesn't sound out of favor, and it is now, as it has always been, a perfectly decent choice for bond holdings. I would sleep well at night using BND, just happen to prefer a different type of bond for my personal needs.
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LeftCoastIV
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Re: Who is buying bonds?

Post by LeftCoastIV »

adave wrote: Mon Feb 12, 2024 2:49 pm The issue is I make good W2 income (physician) and as of today am in decent health and relatively young (47 yo).

We live a nice lifestyle but below our means and are debt free for the last 10 years.

Thus, w2 income with bonus easily covers living expenses. Thus when I invest I am after long term capital gains. Income is not needed from bonds and are tax inefficient.
Treasuries are exempt from state/local taxes, and muni bonds are generally exempt from federal taxes. The market in my view arbitrages out the opportunity for high income earners to benefit from buying munis, but perhaps your math for your situation gives a preference.

FWIW, we buy short-term treasuries rather than bond funds. We hold to maturity (short duration) so don't worry about duration/rate risk and it's impact on price (NAV). You may want to look into TIPS as well if you want to specifically protect your real purchasing power.
NYCwriter
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Re: Who is buying bonds?

Post by NYCwriter »

I wouldn't call bond funds out of favor at present. We are stabilizing after a pretty historic rise in yields. Rates can still fluctuate, but bonds look a lot more attractive in terms of yield, and this has made it easier for people who are shifting their AA or rebalancing.

I use Treasury MM (VUSXX) and Short Term (1-3 year) Treasury (VGSH) in taxable since I now have a lot of an aggregate bond fund in my tax deferred.

For taxable, you want to consider options that minimize taxes if you are in a higher tax bracket. If in tax deferred it doesn't matter.
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Re: Who is buying bonds?

Post by Johnnie »

adave wrote: Sun Feb 11, 2024 4:52 pm Rates have likely peaked however for this cycle. BND on sale.
Famous last words?

Not predicting, just wondering.
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Re: Who is buying bonds?

Post by Cocoa Beach Bum »

Yeah, who the heck is buying the billions of dollars of new bonds issued so far this month?
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Re: Who is buying bonds?

Post by MoonOrb »

I'm always buying at least some BND each month, but on Friday I hit a rebalancing mark and bought a lot more.
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Re: Who is buying bonds?

Post by Nussbus »

I’m guilty of buying EDV/GOVZ since April of 23. If a deflationary recession shows up, I should get capital appreciation from EDV/GOVZ. In the meantime, I’m just getting interest payments. :sharebeer
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Re: Who is buying bonds?

Post by BitTooAggressive »

adave wrote: Sun Feb 11, 2024 4:52 pm Rates have likely peaked however for this cycle. BND on sale.
I disagree. Supply is rapidly increasing due to unwinding of balance sheet by Fed and issuing of new debt.

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rockstar
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Re: Who is buying bonds?

Post by rockstar »

I maxed my I Bonds for the year. The fixed rate was too good to be true. I do hope it goes higher. I’d buy I Bonds with a 2% real yield. No phantom tax like TIPS and automatic reinvestment.
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Re: Who is buying bonds?

Post by AlwaysLearningMore »

rockstar wrote: Tue Feb 13, 2024 9:32 am I maxed my I Bonds for the year. The fixed rate was too good to be true. I do hope it goes higher. I’d buy I Bonds with a 2% real yield. No phantom tax like TIPS and automatic reinvestment.
Perhaps todays CPI report will spur a rate increase.👍
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Re: Who is buying bonds?

Post by firebirdparts »

The market timer in me says bonds are more gooder than cash/mm
This time is the same
Elysium
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Re: Who is buying bonds?

Post by Elysium »

Never stopped buying. Whenever I need to rebalance out of stocks that went up, been selling them and buying bonds. It's all part of a large cycle, they may look down now, but the shares accumulated over time will give back in interest payments and eventually price increases. Next flight to safety cycle comes those who hold lots and lots of bond shares will be happy. Many investors are planning to be prepared for the last crisis, which is over, the next one may be different, you don't want to be planning for the last crisis, but for future ones. Bonds may have a good role to play in the next one. I am planning on building a ballast with them.
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beyou
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Re: Who is buying bonds?

Post by beyou »

You touched on a few different topic with your question.
Best you answer some questions to get relevant help.

1) Are you asking about an emergency fund or just something to reduce portfolio volatility ?
Different choices would be used for each purpose. MMkt and savings bonds combo is best for emergency funds.

2) What is your tax bracket ? WIth high income one might consider muni bonds instead of BND.

3) Are you concerned about inflation ? With a stock heavy portfolio you will do OK with modest inflation.
With very high inflation, TIPS bonds/bond funds would be better than BND, but taxed more than munis that have no inflation protection.

4) What is your age ?
If you younger, you should have very little in bonds and then the various type of bond funds wont matter much to your portfolio.
For us retirees, the larger portion of bonds makes these choices more important to consider. I do not hold BND but I have lots of other bonds.
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Re: Who is buying bonds?

Post by rockstar »

AlwaysLearningMore wrote: Tue Feb 13, 2024 10:01 am
rockstar wrote: Tue Feb 13, 2024 9:32 am I maxed my I Bonds for the year. The fixed rate was too good to be true. I do hope it goes higher. I’d buy I Bonds with a 2% real yield. No phantom tax like TIPS and automatic reinvestment.
Perhaps todays CPI report will spur a rate increase.👍
I wouldn’t be surprised if inflation stays around 3%. I don’t see how shelter costs can go down given the limited supply and high rates. Mortgage rates are too high. And not enough housing was built after the GFC. It’s going to take a long time to work through these issues.

In other words, I still feel good buying inflation protection at these lower levels.
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Re: Who is buying bonds?

Post by livesoft »

livesoft wrote: Mon Feb 12, 2024 3:27 pm I had to rebalance today because of the spectacular gains in the past week. Sold some small-cap value and bought some BND. They call it "rebalancing."
Since SCV is down about -3.3% today and BND is only down -0.7%, I'm gonna call yesterday's rebalancing a 2.6% success! Also since this is mid-month, this will never show up in PortfolioVisualizer.com.
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Re: Who is buying bonds?

Post by stocknoob4111 »

BitTooAggressive wrote: Tue Feb 13, 2024 2:58 am I disagree. Supply is rapidly increasing due to unwinding of balance sheet by Fed and issuing of new debt.
This is my fear as well.. lots of debt about to hit the market from the Fed and of course the government's need to continue financing their record deficits. Who exactly is going to buy all this paper?

I don't know if there is much upside in BND but also staying in cash is going to be a losing proposition.

No good options here.
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Re: Who is buying bonds?

Post by rockstar »

stocknoob4111 wrote: Tue Feb 13, 2024 2:31 pm
BitTooAggressive wrote: Tue Feb 13, 2024 2:58 am I disagree. Supply is rapidly increasing due to unwinding of balance sheet by Fed and issuing of new debt.
This is my fear as well.. lots of debt about to hit the market from the Fed and of course the government's need to continue financing their record deficits. Who exactly is going to buy all this paper?

I don't know if there is much upside in BND but also staying in cash is going to be a losing proposition.

No good options here.
The age in bonds cohort is large. The target date fund cohort also helps. Foreign investors will help if our yields are competitive. I’m not worried yet. But it’s something to watch.
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Re: Who is buying bonds?

Post by BitTooAggressive »

stocknoob4111 wrote: Tue Feb 13, 2024 2:31 pm
BitTooAggressive wrote: Tue Feb 13, 2024 2:58 am I disagree. Supply is rapidly increasing due to unwinding of balance sheet by Fed and issuing of new debt.
This is my fear as well.. lots of debt about to hit the market from the Fed and of course the government's need to continue financing their record deficits. Who exactly is going to buy all this paper?

I don't know if there is much upside in BND but also staying in cash is going to be a losing proposition.

No good options here.
Agree. When we start having failed auctions will Fed let them fail and force government to put out bonds with a higher rate. I hope he forces the rate rise and let politicians fight over political issues.

The Feds job is tough enough without trying to fix that also.

So to make this actionable I plan to stay on more shorter yield than I would otherwise.

Bad options to really bad.
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Re: Who is buying bonds?

Post by pascalwager »

TheRoundHeadedKid wrote: Mon Feb 12, 2024 12:29 pm I don't try to predict anything about the stock and bond market because I am terrible at that compared to the pros. So I invest in every Vanguard ETFs equally. It turns out that is about a 20/80 bond/stock allocation.
Me too, except I use their etf-of-etfs, "The Big 86".

Seriously, did you get any questions/comments from Vanguard?
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Re: Who is buying bonds?

Post by z3r0c00l »

Cocoa Beach Bum wrote: Mon Feb 12, 2024 4:32 pm Yeah, who the heck is buying the billions of dollars of new bonds issued so far this month?
Governments, individuals, pension funds, brokerages, insurance companies...
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Re: Who is buying bonds?

Post by pascalwager »

TheRoundHeadedKid wrote: Mon Feb 12, 2024 12:29 pm I don't try to predict anything about the stock and bond market because I am terrible at that compared to the pros. So I invest in every Vanguard ETFs equally. It turns out that is about a 20/80 bond/stock allocation.
Is Vanguard managing it for you: distributing contributions, rebalancing, etc.?
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Re: Who is buying bonds?

Post by pascalwager »

Elysium wrote: Tue Feb 13, 2024 10:13 am Never stopped buying. Whenever I need to rebalance out of stocks that went up, been selling them and buying bonds. It's all part of a large cycle, they may look down now, but the shares accumulated over time will give back in interest payments and eventually price increases. Next flight to safety cycle comes those who hold lots and lots of bond shares will be happy. Many investors are planning to be prepared for the last crisis, which is over, the next one may be different, you don't want to be planning for the last crisis, but for future ones. Bonds may have a good role to play in the next one. I am planning on building a ballast with them.
I assume you avoid selling bonds to buy stocks in a down market. Do you have a low rebalancing threshold?
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TierArtz
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Re: Who is buying bonds?

Post by TierArtz »

I'm 62 and probably 2 years away from retirement. My target AA is 65% stocks and 35% bonds. My 401(k), TSP, and two NQDCPs are all 100% bonds. Unless the stock market declines a bunch, I'm putting all of my biweekly withholdings into Total Bond-like indexes or CITs to try to close the gap (currently about $60K). Just do what your plan/IPS/spreadsheet says to do :)
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Re: Who is buying bonds?

Post by Elysium »

pascalwager wrote: Tue Feb 13, 2024 11:18 pm
Elysium wrote: Tue Feb 13, 2024 10:13 am Never stopped buying. Whenever I need to rebalance out of stocks that went up, been selling them and buying bonds. It's all part of a large cycle, they may look down now, but the shares accumulated over time will give back in interest payments and eventually price increases. Next flight to safety cycle comes those who hold lots and lots of bond shares will be happy. Many investors are planning to be prepared for the last crisis, which is over, the next one may be different, you don't want to be planning for the last crisis, but for future ones. Bonds may have a good role to play in the next one. I am planning on building a ballast with them.
I assume you avoid selling bonds to buy stocks in a down market. Do you have a low rebalancing threshold?
No, I don't avoid that. I do sell bonds to buy stocks in down market, if bonds were up at same time, not if they are also down. In 2020, I could do some of that during the short Feb-March drop when Treasuries were up quite a bit and stocks were down, causing a re-balancing opportunity. In 2022 I couldn't sell bonds to buy stocks, however I had some cash buildup from selling stocks that went up in 2020-21 that I kept in MMF and new contributions accumulating in cash, all this was invested in stocks after 2022, then re-balanced at end of 2023 to buy bonds. I also did buy bonds after selling stocks at end of 2021, not everything works perfect. My threshold is at least 5% or more.
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Re: Who is buying bonds?

Post by AlwaysLearningMore »

rockstar wrote: Tue Feb 13, 2024 2:37 pm
stocknoob4111 wrote: Tue Feb 13, 2024 2:31 pm
BitTooAggressive wrote: Tue Feb 13, 2024 2:58 am I disagree. Supply is rapidly increasing due to unwinding of balance sheet by Fed and issuing of new debt.
This is my fear as well.. lots of debt about to hit the market from the Fed and of course the government's need to continue financing their record deficits. Who exactly is going to buy all this paper?

I don't know if there is much upside in BND but also staying in cash is going to be a losing proposition.

No good options here.
The age in bonds cohort is large. The target date fund cohort also helps. Foreign investors will help if our yields are competitive. I’m not worried yet. But it’s something to watch.
Exactly. Every couple of weeks lots and lots and lots of people are automatically purchasing bonds in their target retirement type funds.
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Re: Who is buying bonds?

Post by WhitePuma »

Bonds don't seem so bad at today's rates. Just bought me some BND.
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Re: Who is buying bonds?

Post by pascalwager »

I have 60% stocks and 40% bonds: 50% VG Short-Term Investment Grade Fund and 50% TIPS funds. The overall duration is matched to my investment horizon. I make regular duration reductions in the TIPS funds as needed using LTPZ and SCHP.

I rebalance every few years barring a large market change. I would have used 100% TIPS bonds but for account fund limitations.
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Re: Who is buying bonds?

Post by stocknoob4111 »

WhitePuma wrote: Wed Feb 14, 2024 12:23 pm Bonds don't seem so bad at today's rates. Just bought me some BND.
Just so you know BND is yielding 3.4% atm vs 5% on Money Markets. Even if Fed cuts 50 bps later this year it will still be well above the yield of BND.

When will Distribution yield on BND get to it's SEC yield of 4.45%? That is the question that seems to be difficult to answer.
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Re: Who is buying bonds?

Post by WhitePuma »

stocknoob4111 wrote: Fri Feb 16, 2024 11:30 am
WhitePuma wrote: Wed Feb 14, 2024 12:23 pm Bonds don't seem so bad at today's rates. Just bought me some BND.
Just so you know BND is yielding 3.4% atm vs 5% on Money Markets. Even if Fed cuts 50 bps later this year it will still be well above the yield of BND.

When will Distribution yield on BND get to it's SEC yield of 4.45%? That is the question that seems to be difficult to answer.
If you have a 5-6 year (or longer) horizon for the money, BND will come out ahead.

I no longer concern myself with distribution yield. SEC yield is forward looking expectation of total return.
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CyclingDuo
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Re: Who is buying bonds?

Post by CyclingDuo »

adave wrote: Sun Feb 11, 2024 4:42 pm Currently 95% equity and 5% cash in MMF. Thinking about switching to 90% Equity and 10% BND, minimal cash.

Take a few chips off the table. BND provides some income also. BND seems out of favor but looks respectable to me.

I'm no expert however.
Is a switch from 5% in bonds to 10% going to make very much difference? I would go beyond the switch you are contemplating to look at a gradual shift over the coming years to what AA you want to arrive, come retirement.

If you look at the Vanguard Target Date Retirement Funds for your age as if you were planning to retire in your 60's...

The TDF 2045 fund currently has 15.1% invested in bonds.
The TDF 2040 fund currently has 22.5% invested in bonds.

Those are good starting points for you to at least think about your current AA of 95/5 compared to the TDFs if you were to retire at the age range of 63 - 68. The TDFs gradually adjust the AA as the typical investor in the funds gets closer to their retirement age. So not a sudden switch, but a gradual shift over the years.

If you were retiring 11 years from now at the young age of 58, the TDF 2035 currently has 29.9% invested in bonds.

However you look at it, your AA is much more aggressive than the Vanguard TDFs. I guess we could argue if these funds are run by experts or not, but imagine a lot of thought has gone into the process of determining the AA for each of those funds. Whether or not they are the best place to look as a starting point would be determined by your goals, risk tolerance, and other income streams you may have in retirement (pension, SS, etc...).

When we were your age, we chose Asset Allocations in our workplace retirement plans that were designed to start to move our overall portfolio's AA in a direction to include more bonds. A mix of 70/30, 65/35, and 60/40 were used for various workplace retirement plans between my spouse and myself.

So our answer is yes. We have been buying bonds in our workplace retirement plans bi-weekly via periodic investing from our paychecks for the past 21 years. And I am still doing so today in my workplace plan (wife retired last year). We also have been buying TIPS and I Bonds in addition to the bond funds we use. Robo-invest accounts are also buying an AA that includes at least 30% bonds on a weekly basis in some of our smaller accounts as well - all set on automatic pilot.

Whether you use a switch, a shift, or some combination of the two - I think you are correct in looking at it and asking questions of how best to get from point A to point B.

CyclingDuo
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mptfan
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Joined: Mon Mar 05, 2007 8:58 am

Re: Who is buying bonds?

Post by mptfan »

adave wrote: Sun Feb 11, 2024 4:42 pmBND seems out of favor...
What does this mean?
dbr
Posts: 46030
Joined: Sun Mar 04, 2007 8:50 am

Re: Who is buying bonds?

Post by dbr »

mptfan wrote: Sun Feb 18, 2024 10:25 am
adave wrote: Sun Feb 11, 2024 4:42 pmBND seems out of favor...
What does this mean?
It means there has been a lot of posting on the forum since interest rates went up and BND NAV went down where people are unhappy with that and want to find a different selection of fixed income holdings that somehow evade that sort of bad thing happening.

The irony is that if BND had gone out of favor before interest rates went up it wouldn't have ended up out of favor now.
hudson
Posts: 7050
Joined: Fri Apr 06, 2007 9:15 am

Re: Who is buying bonds?

Post by hudson »

adave wrote: Sun Feb 11, 2024 4:42 pm Currently 95% equity and 5% cash in MMF. Thinking about switching to 90% Equity and 10% BND, minimal cash.

Take a few chips off the table. BND provides some income also. BND seems out of favor but looks respectable to me.

I'm no expert however.
I prefer fixed income as I'm 0/100.
I don't know what BND is paying but a 5 year treasury is paying over 4% with no state taxes.
I'd check after tax CD rates before buying treasuries.
Shorter treasuries are paying more.

https://home.treasury.gov/resource-cent ... nth=202402
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