Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
just1question
Posts: 69
Joined: Thu Mar 21, 2019 1:36 pm

Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by just1question » Tue Sep 10, 2019 6:51 pm

I've owned Vanguard Total International Bond Fund VTABX for several years, and it's performed well for me for a fixed income holding, actually outperforming the Vanguard Total Bond Market Index VBTLX.

Here's the thing though. VTABX is part of my fixed income asset allocation, and the current SEC yield is a miniscule 0.29%. While I try not to tinker with my asset allocation, the low yield doesn't seem to warrant holding it any longer. Plus, there obviously has been talk of negative yields in parts of the world, if we are not already there. Yet, it continues to comprise a part of Vanguard's target date funds, so clearly Vanguard hasn't given up on it.

Any advice as to (1) whether to keep or dump VTABX, and (2) if dump, what alternatives I might want to look at.

As far as alternatives, I've considered a high dividend ETF, but that really isn't fixed income. I've also considered a preferred stock ETF and emerging markets bond ETF (VWOB), but my research on this forum has revealed too many downsides to those options; plus, none give international exposure on the equity side.

By way of background, my overall allocation is about 76% equities and 24% fixed income (not including home equity and emergency fund). The VTABX is held in my taxable account, and constitutes 7% of that account, which is about half my liquid assets. I would have held it in my IRA, but my IRA is already filled with higher yield bond funds. And my 401k has limited fixed income options with fairly high expense ratios.

What to do?

Thanks.

Topic Author
just1question
Posts: 69
Joined: Thu Mar 21, 2019 1:36 pm

Re: Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by just1question » Tue Sep 10, 2019 6:55 pm

I should add there are a couple of other options: money market and CD, but just keeping pace with inflation isn't ideal.

sharx
Posts: 39
Joined: Fri May 17, 2013 4:35 pm

Re: Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by sharx » Tue Sep 10, 2019 6:57 pm

I'm trying not to think of negative yields as anything special. Yields could always go more negative than they are, and I even saw that the CEO of JP Morgan said they're preparing for the scenario that yields are negative in the US too. In Europe one possibility is that banks will start offering negative interest rates on savings accounts. In that type of scenario it might be nice to holding on to something that has .29%.

The main thing that makes negative yields special is that holding physical cash then becomes a more attractive option but it's impractical for obvious reasons.

User avatar
grabiner
Advisory Board
Posts: 25002
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by grabiner » Tue Sep 10, 2019 8:38 pm

The SEC yield ignores the currency hedging; you expect a higher return from the fund than the SEC yield indicates. For example, if a euro bond has a 0% yield and a dollar bond has a 2% yield, and a contract to sell euros for $1020 next year costs $1000 in today's euros, then holding the euro bond and the futures contract will give a 2% yield for one year.
Wiki David Grabiner

venkman
Posts: 1040
Joined: Tue Mar 14, 2017 10:33 pm

Re: Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by venkman » Tue Sep 10, 2019 10:54 pm

grabiner wrote:
Tue Sep 10, 2019 8:38 pm
The SEC yield ignores the currency hedging; you expect a higher return from the fund than the SEC yield indicates. For example, if a euro bond has a 0% yield and a dollar bond has a 2% yield, and a contract to sell euros for $1020 next year costs $1000 in today's euros, then holding the euro bond and the futures contract will give a 2% yield for one year.
^This.

If you look at the past 12 months of distributions for VTABX, it's relatively steady at around 2 cents per share each month; and then the December distribution shoots up to 43.8 cents per share.

Topic Author
just1question
Posts: 69
Joined: Thu Mar 21, 2019 1:36 pm

Re: Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by just1question » Wed Sep 11, 2019 8:57 am

venkman wrote:
Tue Sep 10, 2019 10:54 pm
grabiner wrote:
Tue Sep 10, 2019 8:38 pm
The SEC yield ignores the currency hedging; you expect a higher return from the fund than the SEC yield indicates. For example, if a euro bond has a 0% yield and a dollar bond has a 2% yield, and a contract to sell euros for $1020 next year costs $1000 in today's euros, then holding the euro bond and the futures contract will give a 2% yield for one year.
^This.

If you look at the past 12 months of distributions for VTABX, it's relatively steady at around 2 cents per share each month; and then the December distribution shoots up to 43.8 cents per share.
Does the "shoot[ing] up to 43.8 cents per share" last December mean that I should expect as similar dividend increase this coming December, i.e., does this usually happen at the end of the year?

lazyday
Posts: 3397
Joined: Wed Mar 14, 2007 10:27 pm

Re: Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by lazyday » Wed Sep 11, 2019 9:19 am

Would it be helpful to have a Bogleheads wiki page on Covered Interest Rate Parity?

I don’t have the expertise to write it, just thought it might be helpful to refer to it in threads like this one or viewtopic.php?t=289711 especially if the page started off with a simple explanation.

User avatar
Hector
Posts: 1085
Joined: Fri Dec 24, 2010 2:21 pm
Contact:

Re: Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by Hector » Wed Sep 11, 2019 10:15 am

grabiner wrote:
Tue Sep 10, 2019 8:38 pm
The SEC yield ignores the currency hedging; you expect a higher return from the fund than the SEC yield indicates. For example, if a euro bond has a 0% yield and a dollar bond has a 2% yield, and a contract to sell euros for $1020 next year costs $1000 in today's euros, then holding the euro bond and the futures contract will give a 2% yield for one year.
What do you mean by "a dollar bond has a 2% yield"?

User avatar
abuss368
Posts: 15164
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by abuss368 » Thu Sep 12, 2019 2:21 pm

grabiner wrote:
Tue Sep 10, 2019 8:38 pm
The SEC yield ignores the currency hedging; you expect a higher return from the fund than the SEC yield indicates. For example, if a euro bond has a 0% yield and a dollar bond has a 2% yield, and a contract to sell euros for $1020 next year costs $1000 in today's euros, then holding the euro bond and the futures contract will give a 2% yield for one year.
I did a rough back of the napkin calculation a few weeks ago by adding up all distributions of Total International Bond Index and dividing by an average value. The result was around 2.00%. So this is a result of currency hedging?
John C. Bogle: "Simplicity is the master key to financial success."

Elysium
Posts: 1663
Joined: Mon Apr 02, 2007 6:22 pm

Re: Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by Elysium » Thu Sep 12, 2019 4:22 pm

abuss368 wrote:
Thu Sep 12, 2019 2:21 pm
grabiner wrote:
Tue Sep 10, 2019 8:38 pm
The SEC yield ignores the currency hedging; you expect a higher return from the fund than the SEC yield indicates. For example, if a euro bond has a 0% yield and a dollar bond has a 2% yield, and a contract to sell euros for $1020 next year costs $1000 in today's euros, then holding the euro bond and the futures contract will give a 2% yield for one year.
I did a rough back of the napkin calculation a few weeks ago by adding up all distributions of Total International Bond Index and dividing by an average value. The result was around 2.00%. So this is a result of currency hedging?
Most of the returns from Intl Bond lately must be currency hedging because of the stronger dollar. The reverse will happen when dollar weakens. This is the reason why I finally decided to roll all of my money in the Intl Bond fund to Total Bond fund. Simplicity is better. I would expect the returns to be about even in the long run, and the US yields are higher, there is no added benefit to holding it.

User avatar
abuss368
Posts: 15164
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by abuss368 » Thu Sep 12, 2019 4:31 pm

Elysium wrote:
Thu Sep 12, 2019 4:22 pm
abuss368 wrote:
Thu Sep 12, 2019 2:21 pm
grabiner wrote:
Tue Sep 10, 2019 8:38 pm
The SEC yield ignores the currency hedging; you expect a higher return from the fund than the SEC yield indicates. For example, if a euro bond has a 0% yield and a dollar bond has a 2% yield, and a contract to sell euros for $1020 next year costs $1000 in today's euros, then holding the euro bond and the futures contract will give a 2% yield for one year.
I did a rough back of the napkin calculation a few weeks ago by adding up all distributions of Total International Bond Index and dividing by an average value. The result was around 2.00%. So this is a result of currency hedging?
Most of the returns from Intl Bond lately must be currency hedging because of the stronger dollar. The reverse will happen when dollar weakens. This is the reason why I finally decided to roll all of my money in the Intl Bond fund to Total Bond fund. Simplicity is better. I would expect the returns to be about even in the long run, and the US yields are higher, there is no added benefit to holding it.
Thanks!
John C. Bogle: "Simplicity is the master key to financial success."

bluquark
Posts: 719
Joined: Mon Oct 22, 2018 2:30 pm

Re: Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by bluquark » Thu Sep 12, 2019 5:20 pm

Elysium wrote:
Thu Sep 12, 2019 4:22 pm
Most of the returns from Intl Bond lately must be currency hedging because of the stronger dollar. The reverse will happen when dollar weakens.
Although it's true that most of the return is due to currency hedging, the hedging has eliminated the effect of the strengthening dollar. That's the point of hedging. (Meanwhile, unhedged international bonds have been collapsing because of the strengthening dollar.)

The hedge return is instead based on the higher short-term interest rates in the US. Hedge contracts involve notionally exchanging two currencies one month in the future, so they incorporate the expected interest growth differential during that month.

User avatar
grabiner
Advisory Board
Posts: 25002
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by grabiner » Thu Sep 12, 2019 7:57 pm

Hector wrote:
Wed Sep 11, 2019 10:15 am
grabiner wrote:
Tue Sep 10, 2019 8:38 pm
The SEC yield ignores the currency hedging; you expect a higher return from the fund than the SEC yield indicates. For example, if a euro bond has a 0% yield and a dollar bond has a 2% yield, and a contract to sell euros for $1020 next year costs $1000 in today's euros, then holding the euro bond and the futures contract will give a 2% yield for one year.
What do you mean by "a dollar bond has a 2% yield"?
By "a dollar bond", I mean a bond which is denominated in dollars, paying investors back in dollars.

A $1000 bond denominated in dollars with a 2% yield pays $20 every year in coupons, and pays back the $1000 at maturity. A EUR 900 bond ($1000 at today's exchange rate) with a 0% yield pays no coupons, just paying back EUR 900 at maturity. But if EUR 900 is worth $1020 a year from now, the two bonds are equally good investments; you could pay EUR 900 now for a contract that would pay you $1020 next year.
Wiki David Grabiner

Elysium
Posts: 1663
Joined: Mon Apr 02, 2007 6:22 pm

Re: Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by Elysium » Thu Sep 12, 2019 9:00 pm

bluquark wrote:
Thu Sep 12, 2019 5:20 pm
Elysium wrote:
Thu Sep 12, 2019 4:22 pm
Most of the returns from Intl Bond lately must be currency hedging because of the stronger dollar. The reverse will happen when dollar weakens.
Although it's true that most of the return is due to currency hedging, the hedging has eliminated the effect of the strengthening dollar. That's the point of hedging. (Meanwhile, unhedged international bonds have been collapsing because of the strengthening dollar.)

The hedge return is instead based on the higher short-term interest rates in the US. Hedge contracts involve notionally exchanging two currencies one month in the future, so they incorporate the expected interest growth differential during that month.
Agree, hedged is better than unhedged for foreign bonds. While I didn't see any real problems holding this fund which looks well constructed and well managed, there is also very little actual benefit when compared to Total bond.

Topic Author
just1question
Posts: 69
Joined: Thu Mar 21, 2019 1:36 pm

Re: Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by just1question » Fri Sep 13, 2019 11:15 am

Elysium wrote:
Thu Sep 12, 2019 9:00 pm
bluquark wrote:
Thu Sep 12, 2019 5:20 pm
Elysium wrote:
Thu Sep 12, 2019 4:22 pm
Most of the returns from Intl Bond lately must be currency hedging because of the stronger dollar. The reverse will happen when dollar weakens.
Although it's true that most of the return is due to currency hedging, the hedging has eliminated the effect of the strengthening dollar. That's the point of hedging. (Meanwhile, unhedged international bonds have been collapsing because of the strengthening dollar.)

The hedge return is instead based on the higher short-term interest rates in the US. Hedge contracts involve notionally exchanging two currencies one month in the future, so they incorporate the expected interest growth differential during that month.
Agree, hedged is better than unhedged for foreign bonds. While I didn't see any real problems holding this fund which looks well constructed and well managed, there is also very little actual benefit when compared to Total bond.
The benefit (perhaps) is diversification. I also own total bond BND. Is that benefit enough to warrant maintaining the BNDX?

User avatar
nedsaid
Posts: 12430
Joined: Fri Nov 23, 2012 12:33 pm

Re: Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by nedsaid » Fri Sep 13, 2019 11:26 am

I can't ignore the largest asset class in the world thus about 12% of my bonds are International. The reason I haven't followed Vanguard's recommendation to go with 30% of bonds in International is that the yields are so darned low. The diversification benefits from foreign bonds are very mild and thus I have said that owning International Bonds is entirely optional for the small investor. I have chosen to own them.
A fool and his money are good for business.

User avatar
abuss368
Posts: 15164
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by abuss368 » Fri Sep 13, 2019 11:32 am

just1question wrote:
Fri Sep 13, 2019 11:15 am
Elysium wrote:
Thu Sep 12, 2019 9:00 pm
bluquark wrote:
Thu Sep 12, 2019 5:20 pm
Elysium wrote:
Thu Sep 12, 2019 4:22 pm
Most of the returns from Intl Bond lately must be currency hedging because of the stronger dollar. The reverse will happen when dollar weakens.
Although it's true that most of the return is due to currency hedging, the hedging has eliminated the effect of the strengthening dollar. That's the point of hedging. (Meanwhile, unhedged international bonds have been collapsing because of the strengthening dollar.)

The hedge return is instead based on the higher short-term interest rates in the US. Hedge contracts involve notionally exchanging two currencies one month in the future, so they incorporate the expected interest growth differential during that month.
Agree, hedged is better than unhedged for foreign bonds. While I didn't see any real problems holding this fund which looks well constructed and well managed, there is also very little actual benefit when compared to Total bond.
The benefit (perhaps) is diversification. I also own total bond BND. Is that benefit enough to warrant maintaining the BNDX?
Vanguard investment experts recommend a two fund strategy for bonds:
* Total Bond Index
* Total International Bond Index
John C. Bogle: "Simplicity is the master key to financial success."

Elysium
Posts: 1663
Joined: Mon Apr 02, 2007 6:22 pm

Re: Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by Elysium » Fri Sep 13, 2019 11:58 am

just1question wrote:
Fri Sep 13, 2019 11:15 am
Elysium wrote:
Thu Sep 12, 2019 9:00 pm
bluquark wrote:
Thu Sep 12, 2019 5:20 pm
Elysium wrote:
Thu Sep 12, 2019 4:22 pm
Most of the returns from Intl Bond lately must be currency hedging because of the stronger dollar. The reverse will happen when dollar weakens.
Although it's true that most of the return is due to currency hedging, the hedging has eliminated the effect of the strengthening dollar. That's the point of hedging. (Meanwhile, unhedged international bonds have been collapsing because of the strengthening dollar.)

The hedge return is instead based on the higher short-term interest rates in the US. Hedge contracts involve notionally exchanging two currencies one month in the future, so they incorporate the expected interest growth differential during that month.
Agree, hedged is better than unhedged for foreign bonds. While I didn't see any real problems holding this fund which looks well constructed and well managed, there is also very little actual benefit when compared to Total bond.
The benefit (perhaps) is diversification. I also own total bond BND. Is that benefit enough to warrant maintaining the BNDX?
What are you diversifying away from? It is important to know what risks with Total Bond are you getting diversified away. One obvious answer is different interest rates, but the US Yields are already higher. The rest doesn't seem very important.

Elysium
Posts: 1663
Joined: Mon Apr 02, 2007 6:22 pm

Re: Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by Elysium » Fri Sep 13, 2019 1:28 pm

abuss368 wrote:
Fri Sep 13, 2019 11:32 am
just1question wrote:
Fri Sep 13, 2019 11:15 am
Elysium wrote:
Thu Sep 12, 2019 9:00 pm
bluquark wrote:
Thu Sep 12, 2019 5:20 pm
Elysium wrote:
Thu Sep 12, 2019 4:22 pm
Most of the returns from Intl Bond lately must be currency hedging because of the stronger dollar. The reverse will happen when dollar weakens.
Although it's true that most of the return is due to currency hedging, the hedging has eliminated the effect of the strengthening dollar. That's the point of hedging. (Meanwhile, unhedged international bonds have been collapsing because of the strengthening dollar.)

The hedge return is instead based on the higher short-term interest rates in the US. Hedge contracts involve notionally exchanging two currencies one month in the future, so they incorporate the expected interest growth differential during that month.
Agree, hedged is better than unhedged for foreign bonds. While I didn't see any real problems holding this fund which looks well constructed and well managed, there is also very little actual benefit when compared to Total bond.
The benefit (perhaps) is diversification. I also own total bond BND. Is that benefit enough to warrant maintaining the BNDX?
Vanguard investment experts recommend a two fund strategy for bonds:
* Total Bond Index
* Total International Bond Index
They do. I have read their reasons listed in a paper they published. The only reason I could think of owning Intl bonds instead of US bonds were if something were to happen to US bonds such as defaults, and in that scenario situation will be so bad that Intl bonds aren't likely to protect us. I really don't see a problem owning it, but in my case decided simplicity was better since you no longer need to worry if one is doing better than other.

bluquark
Posts: 719
Joined: Mon Oct 22, 2018 2:30 pm

Re: Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by bluquark » Fri Sep 13, 2019 1:50 pm

Elysium wrote:
Fri Sep 13, 2019 11:58 am
What are you diversifying away from? It is important to know what risks with Total Bond are you getting diversified away. One obvious answer is different interest rates, but the US Yields are already higher.
My understanding is that the main thing that gets diversified with hedged developed international bonds is the term risk. Both US govt bonds and hedged international bonds include the same US short term interest rate (the latter indirectly via the hedge return). But the yield curves may be shaped differently on the longer end, and if you hold half-and-half local and international bonds, you'll get the average of the term premiums. This is why Vanguard's backtests have shown slightly reduced volatility from holding some international bonds.

User avatar
abuss368
Posts: 15164
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by abuss368 » Fri Sep 13, 2019 2:46 pm

Elysium wrote:
Fri Sep 13, 2019 1:28 pm
abuss368 wrote:
Fri Sep 13, 2019 11:32 am
just1question wrote:
Fri Sep 13, 2019 11:15 am
Elysium wrote:
Thu Sep 12, 2019 9:00 pm
bluquark wrote:
Thu Sep 12, 2019 5:20 pm


Although it's true that most of the return is due to currency hedging, the hedging has eliminated the effect of the strengthening dollar. That's the point of hedging. (Meanwhile, unhedged international bonds have been collapsing because of the strengthening dollar.)

The hedge return is instead based on the higher short-term interest rates in the US. Hedge contracts involve notionally exchanging two currencies one month in the future, so they incorporate the expected interest growth differential during that month.
Agree, hedged is better than unhedged for foreign bonds. While I didn't see any real problems holding this fund which looks well constructed and well managed, there is also very little actual benefit when compared to Total bond.
The benefit (perhaps) is diversification. I also own total bond BND. Is that benefit enough to warrant maintaining the BNDX?
Vanguard investment experts recommend a two fund strategy for bonds:
* Total Bond Index
* Total International Bond Index
They do. I have read their reasons listed in a paper they published. The only reason I could think of owning Intl bonds instead of US bonds were if something were to happen to US bonds such as defaults, and in that scenario situation will be so bad that Intl bonds aren't likely to protect us. I really don't see a problem owning it, but in my case decided simplicity was better since you no longer need to worry if one is doing better than other.
Agree. Generally speaking bonds are probably the one area, assuming investment grade or treasuries, where concentration may not be a bad thing. Increased diversification is not a bad thing but it probably would not make a difference either way.
John C. Bogle: "Simplicity is the master key to financial success."

Elysium
Posts: 1663
Joined: Mon Apr 02, 2007 6:22 pm

Re: Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by Elysium » Fri Sep 13, 2019 3:02 pm

bluquark wrote:
Fri Sep 13, 2019 1:50 pm
Elysium wrote:
Fri Sep 13, 2019 11:58 am
What are you diversifying away from? It is important to know what risks with Total Bond are you getting diversified away. One obvious answer is different interest rates, but the US Yields are already higher.
My understanding is that the main thing that gets diversified with hedged developed international bonds is the term risk. Both US govt bonds and hedged international bonds include the same US short term interest rate (the latter indirectly via the hedge return). But the yield curves may be shaped differently on the longer end, and if you hold half-and-half local and international bonds, you'll get the average of the term premiums. This is why Vanguard's backtests have shown slightly reduced volatility from holding some international bonds.
That is true. At the same time that term risk diversification doesn't appear to buy any meaningful diversification in this instance, slightly reduced volatility perhaps, but do we really need it. I figured simplicity was better and so concentrated everything. Just two bonds for me now, Total Bond and Interm-Term Bond (across multiple accounts), both about similar risk/return profiles, and will consider TIPS in another 10 years for capital preservation.

User avatar
abuss368
Posts: 15164
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by abuss368 » Fri Sep 13, 2019 3:04 pm

Elysium wrote:
Fri Sep 13, 2019 3:02 pm
That is true. At the same time that term risk diversification doesn't appear to buy any meaningful diversification in this instance, slightly reduced volatility perhaps, but do we really need it. I figured simplicity was better and so concentrated everything. Just two bonds for me now, Total Bond and Interm-Term Bond (across multiple accounts), both about similar risk/return profiles, and will consider TIPS in another 10 years for capital preservation.
You could probably go more in the direction of simplicity with Total Bond Index only. A two fund strategy of Total Bond and Intermediate Term Bond could just as easily be Total Bond and Total International Bond.

What i'll never understand is when there are recommendations for three or more bond funds.
John C. Bogle: "Simplicity is the master key to financial success."

User avatar
Hector
Posts: 1085
Joined: Fri Dec 24, 2010 2:21 pm
Contact:

Re: Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by Hector » Fri Sep 13, 2019 4:48 pm

grabiner wrote:
Thu Sep 12, 2019 7:57 pm
Hector wrote:
Wed Sep 11, 2019 10:15 am
grabiner wrote:
Tue Sep 10, 2019 8:38 pm
The SEC yield ignores the currency hedging; you expect a higher return from the fund than the SEC yield indicates. For example, if a euro bond has a 0% yield and a dollar bond has a 2% yield, and a contract to sell euros for $1020 next year costs $1000 in today's euros, then holding the euro bond and the futures contract will give a 2% yield for one year.
What do you mean by "a dollar bond has a 2% yield"?
By "a dollar bond", I mean a bond which is denominated in dollars, paying investors back in dollars.

A $1000 bond denominated in dollars with a 2% yield pays $20 every year in coupons, and pays back the $1000 at maturity. A EUR 900 bond ($1000 at today's exchange rate) with a 0% yield pays no coupons, just paying back EUR 900 at maturity. But if EUR 900 is worth $1020 a year from now, the two bonds are equally good investments; you could pay EUR 900 now for a contract that would pay you $1020 next year.
Thank you

User avatar
willthrill81
Posts: 12792
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by willthrill81 » Fri Sep 13, 2019 4:51 pm

And people think that stocks are confusing. :mrgreen:
“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
abuss368
Posts: 15164
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by abuss368 » Fri Sep 13, 2019 5:05 pm

Investing in both Total Bond and Total International Bond provides diversification to thousands of individual bonds.
John C. Bogle: "Simplicity is the master key to financial success."

User avatar
abuss368
Posts: 15164
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by abuss368 » Fri Sep 13, 2019 5:07 pm

Curious if yield will continue to decrease with all the negative yield debt.
John C. Bogle: "Simplicity is the master key to financial success."

Elysium
Posts: 1663
Joined: Mon Apr 02, 2007 6:22 pm

Re: Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by Elysium » Fri Sep 13, 2019 6:29 pm

abuss368 wrote:
Fri Sep 13, 2019 3:04 pm
Elysium wrote:
Fri Sep 13, 2019 3:02 pm
That is true. At the same time that term risk diversification doesn't appear to buy any meaningful diversification in this instance, slightly reduced volatility perhaps, but do we really need it. I figured simplicity was better and so concentrated everything. Just two bonds for me now, Total Bond and Interm-Term Bond (across multiple accounts), both about similar risk/return profiles, and will consider TIPS in another 10 years for capital preservation.
You could probably go more in the direction of simplicity with Total Bond Index only. A two fund strategy of Total Bond and Intermediate Term Bond could just as easily be Total Bond and Total International Bond.

What i'll never understand is when there are recommendations for three or more bond funds.
Agreed. It could very well be TBM/TIBM, or just one.

User avatar
abuss368
Posts: 15164
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by abuss368 » Fri Sep 13, 2019 7:49 pm

Elysium wrote:
Fri Sep 13, 2019 6:29 pm
abuss368 wrote:
Fri Sep 13, 2019 3:04 pm
Elysium wrote:
Fri Sep 13, 2019 3:02 pm
That is true. At the same time that term risk diversification doesn't appear to buy any meaningful diversification in this instance, slightly reduced volatility perhaps, but do we really need it. I figured simplicity was better and so concentrated everything. Just two bonds for me now, Total Bond and Interm-Term Bond (across multiple accounts), both about similar risk/return profiles, and will consider TIPS in another 10 years for capital preservation.
You could probably go more in the direction of simplicity with Total Bond Index only. A two fund strategy of Total Bond and Intermediate Term Bond could just as easily be Total Bond and Total International Bond.

What i'll never understand is when there are recommendations for three or more bond funds.
Agreed. It could very well be TBM/TIBM, or just one.
:beer
John C. Bogle: "Simplicity is the master key to financial success."

CnC
Posts: 779
Joined: Thu May 11, 2017 12:41 pm

Re: Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by CnC » Fri Sep 13, 2019 8:25 pm

sharx wrote:
Tue Sep 10, 2019 6:57 pm
I'm trying not to think of negative yields as anything special. Yields could always go more negative than they are, and I even saw that the CEO of JP Morgan said they're preparing for the scenario that yields are negative in the US too. In Europe one possibility is that banks will start offering negative interest rates on savings accounts. In that type of scenario it might be nice to holding on to something that has .29%.

The main thing that makes negative yields special is that holding physical cash then becomes a more attractive option but it's impractical for obvious reasons.
In a negative yield world I'll just take your money and pay you back less later. I have plans to have lots of people pay me for the privilege of giving me.money.

User avatar
spdoublebass
Posts: 570
Joined: Thu Apr 27, 2017 10:04 pm
Location: NY

Re: Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by spdoublebass » Fri Sep 13, 2019 11:48 pm

abuss368 wrote:
Fri Sep 13, 2019 5:05 pm
Investing in both Total Bond and Total International Bond provides diversification to thousands of individual bonds.
Which is what BNDW does.
14594 bonds total.

It’s an ETF of ETFs. Meaning it’s made up of BND and BNDX



Another aspect that I like from holding BNDX is that you can use it to rebalance.
I'm trying to think, but nothing happens

User avatar
abuss368
Posts: 15164
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by abuss368 » Sat Sep 14, 2019 7:05 am

spdoublebass wrote:
Fri Sep 13, 2019 11:48 pm
abuss368 wrote:
Fri Sep 13, 2019 5:05 pm
Investing in both Total Bond and Total International Bond provides diversification to thousands of individual bonds.
Which is what BNDW does.
14594 bonds total.

It’s an ETF of ETFs. Meaning it’s made up of BND and BNDX



Another aspect that I like from holding BNDX is that you can use it to rebalance.
Is that the new global bond fund? I do not know the ticker symbols.
John C. Bogle: "Simplicity is the master key to financial success."

User avatar
spdoublebass
Posts: 570
Joined: Thu Apr 27, 2017 10:04 pm
Location: NY

Re: Vanguard Total Int'l Bond VTABX/BNDX Yield 0.29%

Post by spdoublebass » Sat Sep 14, 2019 12:31 pm

abuss368 wrote:
Sat Sep 14, 2019 7:05 am
spdoublebass wrote:
Fri Sep 13, 2019 11:48 pm
abuss368 wrote:
Fri Sep 13, 2019 5:05 pm
Investing in both Total Bond and Total International Bond provides diversification to thousands of individual bonds.
Which is what BNDW does.
14594 bonds total.

It’s an ETF of ETFs. Meaning it’s made up of BND and BNDX



Another aspect that I like from holding BNDX is that you can use it to rebalance.
Is that the new global bond fund? I do not know the ticker symbols.
I gave you the ticker so you could look at it on Vanguards website. It's is new, but not the on you are referring to, which is the "Global Credit Bond".

BNDW is as I said above. It's an ETF made up of BND and BNDX. It's only an ETF though not a mutual fund.
I'm trying to think, but nothing happens

Post Reply