Corporate Bond Funds Versus Treasury Bond Funds

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JohnnyP853
Posts: 1
Joined: Wed Oct 10, 2018 10:50 pm

Corporate Bond Funds Versus Treasury Bond Funds

Post by JohnnyP853 » Wed Oct 10, 2018 11:11 pm

I am 6-9 years from retirement and keep roughly 70% global stocks and 30% US bonds. I have a variety of Vanguard bond funds, but most of my bonds are in the Vanguard Intermediate Term Corporate Bond Fund. All of my bond funds are in 401k accounts. My question: Why would somebody like me buy treasuries at all? I see 10-yr treasuries are at 3.2% and 10-yr investment grade corporate bonds offer 4.1%. I have also read that the long term default rate is 0.1% for investment grade corporate bonds. I should make an extra .8% on corporate bonds. If there are no tax implications, why would I buy Treasuries? Am I missing something? Thanks.

ExitStageLeft
Posts: 897
Joined: Sat Jan 20, 2018 4:02 pm

Re: Corporate Bond Funds Versus Treasury Bond Funds

Post by ExitStageLeft » Thu Oct 11, 2018 9:24 am

Government treasuries are negatively correlated to the US market, whereas your corporate bonds are positively correlated. During a downturn, your bonds are more likely to drop while treasury bonds will likely hold steady or increase return.

https://www.portfoliovisualizer.com/bac ... ion2_2=100

Scroll down to Results and look at the last column, Market Correlation.

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