Is Now The Time for 2 YR Treasury Bond Funds...for Cash?

[retiredat48]

Oct 11, 2022 4:31:14 GMT archer said:

retiredat48 ,

Are your, and perhaps Gerioux's and Gundlachs ideas to buy now, based on 4.5% being the top? If so this assumes inflation and thus interest rates will not continue to go up. Seems like a gamble to me. While it might be promising that those 2 are taking that gamble, wouldn't be more telling to watch total inflows into long term treasuries as a confirmation. It will take more than 2 gurus to bring the prices up. I would think cash flows would be a more reliable indicator than predicting interest rates. I'm waiting on such signs to re-enter TLT/TMF 

Why is this buying a "gamble."  They will not lose in these treasuries.

Here's the logic of INFLATION.  If inflation continues up (even though it is declining past couple months), then yes, fed may raise rates.  But this is temporary...no?  The fed will eventually break inflation, if not already accomplished.  Then, rates will decline.

So one puts up with a temporary increase in rates, to get a permanent long term increase in the Treasury bonds...a 4.5% rate and expected price gains.  

The time to cry uncle on inflation was a year+ ago, with rates at historic lows, and nowhere to go but up.  That's why I exited all my vanilla, standard-issue bond funds.  

Here's the deal as I see it.  One must look for OPPORTUNITIES...continually.  Re treasuries, we have a fed that has only one tool to fight inflation...raise rates, and/or do quant tightening by selling/offloading the bonds it bought during Covid times.  The "opportunity" is that just as rates were kept artifically low , near zero, for 12 years from banking crisis on, the rates will now be taken to "artificial highs"...to kill inflation. 

There is no way treasury rates would be at these levels in an economy that is in slight decline.  For the first time in my life, a fed is deliberately tanking an economy.  Corp bonds and high yield corp bonds may decline further as we get defaults in a recession.  But the flight to quality (treasuries) will occur.

Regarding TLT, this is a twenty year treasury bond fund, and is used more as a trading vehicle by many.  I too would wait until a bottoming is formed to take a position.  But it is quite tempting for a retiree to lock in/mix in,   a good rate for 20 years!

So IMO the opportunity, or advantage, is to start buying treasuries now.  Too difficult to pick the absolute top, and it is not necessary.  In two more years, most likely fed rate is where they project it to be...2-3%, and you have NAV price increases along with your yield.  Per Girioux, 5 year is the sweet spot between risk of negative NAV changes, a good yield and value, and the potential for price increases in the long run.  There are many, many guru pros stating this.  Even TV stock hound Jim Cramer is lavishing in his 4+%, 2 year treasury purchases he recently  made.


R48

 

[Deleted]

With a google search of the title you can find another source. For example, FA-mag.com has a reprint of the Bloomberg article.

Wish I could copy and paste but for some time I have been unable to do that on BB.

[archer]

retiredat48,
Thanks for explaining. You provided some context that makes it clearer. I think your advocation was to buy treasuries, and I am always thinking of funds. Makes a difference does it not? If you buy actual treasuries they have value upon maturity, and increase in value as interest rates eventually fall. Funds on the other hand will eventually benefit from this also, but if interest rates/yields continue to increase, the fund will lose value in the interim. Honestly though, I'm not clear on just how this works. I'm assuming yields increase with interest rates, and prices come down. But, yields increase when prices fall regardless of interest rates. Which comes first? Seems like the chicken and egg question.

[retiredat48]

@haven ,...I googled and got the article.

Not bad...but some counterpoints:

One could say the move away from treasuries they cite has already occurred. A snippet: "In the second quarter, banks purchased the least amount of Treasuries since the final three months of 2020, Barry wrote in a report last month. The drop in bank demand has been stunning,” he noted. “As deposit growth has slowed sharply, this has reduced bank demand for Treasuries, particularly as the duration of their assets have extended sharply this year.”

R48 reply: note they cite the second quarter. Yes, banks stayed away with lower rates. Now they are buying back. With depositors getting zilch in interest, banks can now get 4% treasuries, the spread is a no-brainer.

The article counterbalances, stating:

--Yet as the structural support for Treasuries gives way, others have stepped in to pick up the slack, albeit at higher rates. “Households,” a catch-all group that includes U.S. hedge funds, saw the biggest jump in second-quarter Treasury holdings among investor types tracked by the Fed.

--Some see good reason for private investors to find Treasuries attractive now, especially given the risk of Fed policy tightening tipping the U.S. into a recession, and with yields at multidecade highs.

--“Valuations are good with the Fed getting closer to the end of its current hiking cycle,” Madziyire said. “The question is whether you are willing to take duration risk now or stay in the front-end until the Fed reaches its policy peak.”

---------------------------------------------------
R48: IOW...everything at a price. The yields have now gone way up. Japan wants to keep its zero percent rate. If they now sell treasuries, where else can they get 4+% risk-free yields? Some foreign currency support exchanging is inevitable. But there is a huge shift underway for investors to now consider treasuries. On the fido forum, many, many investors are stating for the first time they are going to buy treasuries.  This will be billions and billions.

I don't know where the peak rate will be. But for many investors, if the interest rate fits your portfolio needs, wear it! I will likely be adding to treasuries, for my brother and me, about 1-2 days ahead of the next fed announcement, saving some for just after the announcement. We are also discussing a small purchase of TLT (20 yr)!

R48

[retiredat48]

Oct 11, 2022 17:15:34 GMT retiredat48 said:

At @haven ,...I googled and got the article.

Not bad...but some counterpoints:

One could say the move away from treasuries they cite has already occurred. A snippet: "In the second quarter, banks purchased the least amount of Treasuries since the final three months of 2020, Barry wrote in a report last month. The drop in bank demand has been stunning,” he noted. “As deposit growth has slowed sharply, this has reduced bank demand for Treasuries, particularly as the duration of their assets have extended sharply this year.”

R48 reply: note they cite the second quarter. Yes, banks stayed away with lower rates. Now they are buying back. With depositors getting zilch in interest, banks can now get 4% treasuries, the spread is a no-brainer.

The article counterbalances, stating:

--Yet as the structural support for Treasuries gives way, others have stepped in to pick up the slack, albeit at higher rates. “Households,” a catch-all group that includes U.S. hedge funds, saw the biggest jump in second-quarter Treasury holdings among investor types tracked by the Fed.

--Some see good reason for private investors to find Treasuries attractive now, especially given the risk of Fed policy tightening tipping the U.S. into a recession, and with yields at multidecade highs.

--“Valuations are good with the Fed getting closer to the end of its current hiking cycle,” Madziyire said. “The question is whether you are willing to take duration risk now or stay in the front-end until the Fed reaches its policy peak.”

---------------------------------------------------
R48: IOW...everything at a price. The yields have now gone way up. Japan wants to keep its zero percent rate. If they now sell treasuries, where else can they get 4+% risk-free yields? Some foreign currency support exchanging is inevitable. I note the article was silent on China.  AFAIK China is the largest int'l holder of treasuries.  If they ever decide to leave/sell, Katie-bar-the-door!  But there is a huge shift underway for investors to now consider treasuries. On the fido forum, many, many investors are stating for the first time they are going to buy treasuries.  This will be billions and billions.

I don't know where the peak rate will be. But for many investors, if the interest rate fits your portfolio needs, wear it! I will likely be adding to treasuries, for my brother and me, about 1-2 days ahead of the next fed announcement, saving some for just after the announcement. We are also discussing a small purchase of TLT (20 yr)!

R48

[Chahta]

retiredat48, right click and "open in a new private window".

[Deleted]

If buying individual Treasury bonds now, one should be prepared to hold them to maturity if the yields of new issues continue to rise. Personally, I thought of creating a bond ladder this fall, but the attraction no longer appeals to me. Buying treasury debt seems like supplying heroin to a junkie.

[Chahta]

You are correct about the heroin. I had the first rung of my T-bill ladder come due today. Decided to buy the MM. But do what is best for you. May go back to T-bills next month.

[habsui]

I'm (mostly) with R48 on this one. As I have been extremely successful in never buying at the exact bottom, I have started to move back into bonds. I decided to accelerate this, and for the first time in many years bought some individual bonds (2yr and 5yr treasuries). Will add more.

As I buy/sell these on the secondary market, any advantages in using one brokerage over another (I use Vanguard)?

[FD1000]

Giroux (M* interview from May 2022) and Gundlach said already months ago that treasuries are good. Months later the above was a bad decision.
Sure, now it's better than months ago.
Is the time come? I gave you all the clues.
I'm only talking about bond OEFs. I never buy single bonds. The idea is to invest big sum of money and use the best risk/reward finds

[habsui]

Oct 11, 2022 20:51:12 GMT FD1000 said:

Giroux (M* interview from May 2022) and Gundlach said already months ago that treasuries are good. Months later the above was a bad decision.
Sure, now it's better than months ago.
Is the time come? I gave you all the clues.
I'm only talking about bond OEFs. I never buy single bonds. The idea is to invest big sum of money and use the best risk/reward finds

Not sure I understand, what was a bad decision? Also, one can invest large sums in individual bonds. And, for risk/reward, treasuries yielding 1.5-2% above inflation (IFF inflation comes down to 2.5% in 2-3 years), should be very good.

[FD1000]

Oct 11, 2022 21:04:51 GMT habsui said:

Oct 11, 2022 20:51:12 GMT FD1000 said:

Giroux (M* interview from May 2022) and Gundlach said already months ago that treasuries are good. Months later the above was a bad decision.
Sure, now it's better than months ago.
Is the time come? I gave you all the clues.
I'm only talking about bond OEFs. I never buy single bonds. The idea is to invest big sum of money and use the best risk/reward finds

Not sure I understand, what was a bad decision? Also, one can invest large sums in individual bonds. And, for risk/reward, treasuries yielding 1.5-2% above inflation (IFF inflation comes down to 2.5% in 2-3 years), should be very good.

Both G & G recommended treasuries months ago...and treasuries lost since then.

www.morningstar.com/articles/1090182/top-rated-fund-manager-on-where-hes-investing-today

Giroux in May 2022 "So, we have started buying Treasuries."

I'm not interested to hold single bonds. I hold my funds for weeks, months and years, or I can sell it all in 5 minutes. Dealing with 2-3 funds gives me a lot more flexibility. In general, buying single bonds is more complicated, time consuming and you need more knowledge. If you don't know what you are doing, stay away. If you know, a good trader can do better with funds and it's easier. There is a good reason, one of the best bond posters ever, Dick, trade only CEFs/OEFs.

[habsui]

Oct 11, 2022 23:21:03 GMT FD1000 said:

Oct 11, 2022 21:04:51 GMT habsui said:

Not sure I understand, what was a bad decision? Also, one can invest large sums in individual bonds. And, for risk/reward, treasuries yielding 1.5-2% above inflation (IFF inflation comes down to 2.5% in 2-3 years), should be very good.

Both G & G recommended treasuries months ago...and treasuries lost since then.

www.morningstar.com/articles/1090182/top-rated-fund-manager-on-where-hes-investing-today

Giroux in May 2022 "So, we have started buying Treasuries."

I'm not interested to hold single bonds. I hold my funds for weeks, months and years, or I can sell it all in 5 minutes. Dealing with 2-3 funds gives me a lot more flexibility. In general, buying single bonds is more complicated, time consuming and you need more knowledge. If you don't know what you are doing, stay away. If you know, a good trader can do better with funds and it's easier. There is a good reason, one of the best bond posters ever, Dick, trade only CEFs/OEFs.

Fair enough. I'm not sure what has to do with buying treasuries now (or later).

Thanks.

[FD1000]

2 points:
1) R48 talks about funds which is what he uses
2) I just wanted to show that
Gundlach and Giroux have been wrong for months, eventually, they will be right and it's closer now🤑

[retiredat48]

Oct 11, 2022 18:31:34 GMT @haven said:

If buying individual Treasury bonds now, one should be prepared to hold them to maturity if the yields of new issues continue to rise. Personally, I thought of creating a bond ladder this fall, but the attraction no longer appeals to me. Buying treasury debt seems like supplying heroin to a junkie.

@haven ,Chahta ,...Don't understand this position.

You are now giving up on bonds, when they have come way down in price, and rates now attractive??

But OK, here is an interview with David Rosenberg...at end near 16 minute mark he provides some very interesting outlook re treasuries.  (Of course he agrees with me!).  But his key point is this:  not verbatim..."what leads out of (stock and bond)bear markets is that which declined first, and went down a lot.  In this regard, bonds was the leader, and had historical bad declines.  Rosie says stocks will not go up until bond yields peak and go down some.  He predicts this is relatively soon for bonds.  Further, he states to expect treasuries to get to 2-3% yields during the next year.

Same as I am postulating.  Enjoy the video..it is worth it re inflation, stocks, housing and treasuries.

----------------------------------------
(poster bogiegolfer):  Here is a recent video from a guy I follow and listen to and respect.



www.bnnbloomberg.ca/video/~2538589

R48

[retiredat48]

Oct 12, 2022 7:01:00 GMT FD1000 said:

2 points:
1) R48 talks about funds which is what he uses
2) I just wanted to show that
Gundlach and Giroux have been wrong for months, eventually, they will be right and it's closer now🤑

I may also be using direct purchases for treasuries...and ladders.

It is amazing how there are so many investment guru's that I follow, that are not worth it, and are wrong, according to FD.

I could provide a drum-roll of guru's who are stating the same about treasuries.  I introduced another, David Rosenburg, above. 
 

But forget it...they are all wrong!!...per FD

The tested facts of investing are this:  For stock and bond fund managers, just when it is most opportune time to buy their fund, investors are giving up/selling/pulling out.  For the best time to sell (at peaks), investors are flocking in, in droves.

Ask yourself, where are we now in the bond cycle?

Remember, I lived through the following:  treasuries went from 15% yields, to 1.5% yields...but over a period of about 34 years.  That's less than 1/2% a year change.  We just changed (increased) by 3%...and likely by 4%, in 9 months.  These rates fluctuate in sine wave curves.  Even if rates trend higher, there will be price rallies such that one can sell their treasuries if they like, at a gain.  

R48

[FD1000]

Oct 12, 2022 15:56:10 GMT retiredat48 said:

Oct 12, 2022 7:01:00 GMT FD1000 said:

2 points:
1) R48 talks about funds which is what he uses
2) I just wanted to show that
Gundlach and Giroux have been wrong for months, eventually, they will be right and it's closer now🤑

I may also be using direct purchases for treasuries...and ladders.

It is amazing how there are so many investment guru's that I follow, that are not worth it, and are wrong, according to FD.

I could provide a drum-roll of guru's who are stating the same about treasuries.  I introduced another, David Rosenburg, above. 
 

But forget it...they are all wrong!!...per FD

The tested facts of investing are this:  For stock and bond fund managers, just when it is most opportune time to buy their fund, investors are giving up/selling/pulling out.  For the best time to sell (at peaks), investors are flocking in, in droves.

Ask yourself, where are we now in the bond cycle?

Remember, I lived through the following:  treasuries went from 15% yields, to 1.5% yields...but over a period of about 34 years.  That's less than 1/2% a year change.  We just changed (increased) by 3%...and likely by 4%, in 9 months.  These rates fluctuate in sine wave curves.  Even if rates trend higher, there will be price rallies such that one can sell their treasuries if they like, at a gain.  

R48

R48,
I'm trying to avoid personal comments, but it's OK for me to make comments on these "experts"
1) Did any of them told you to sell everything at the end of 02/2020, buy back at the end of 03/2020, sell all early 2022?
I did. BTW, In, the last 5 years, I sold it all 5 times, 3 were correct and I avoided the 20+% decline. The other 2 we're "wrong". I bought back within 3 days, and didn't miss much. This is why my portfolio max loss is less than 1%
2) Fund managers don't do this stuff, and chances are zero they will tell investors to bail out.
3) Rosenberg is a known Perma Bear
4) Most of these experts base their analysis on the past, and regression to the mean. That can be off by months, even years.
5) We already know that both G+G recommended treasuries months ago. Their decisions were fatally wrong. Is this correct or not?
How much these managers lost in 03/2020 and YTD?
6) Sure, now it's a much better time to buy bonds than months ago, but wait, reread this thread from the beginning. It talks about buying bond fund since March 2022, close to 7 months ago.
7) I will buy again when I see a good uptrend. It can be tomorrow or weeks from now. I will not post about it.

I wish you all good luck and I will try to stay away, otherwise posters start complaining that I cross the line. You can't have it both ways.

[retiredat48]

At FD1000,...your comments are welcome...but...

The but is, you keep repeating the same, such as:

--How the various guru's give horrible, WRONG, advice. We heard you.

--How you have performed perfectly in the past...We heard you.

And so on.

But when I posted requesting you "ring the bell" and post when we should be buying back in, in the future, you refused to do so. I will be doing such, via posts and direct posts on the Buys/Sells/Why thread. Readers do not have to read the tea-leaves re my activity..and I will not post back-dated performance results.

FD, you are invited/welcome to keep posting here.

R48

[Deleted]

retiredat48, and others

I am not giving up on bonds. About half my portfolio (RIRA) is in fixed income which generates quite a bit each month. Now with money market rates higher, I don't see the need for a one or two year bond ladder as I did earlier this year. I speculate in equity from time to time. Not much of that so far this year.

[mozart522]

I don't listen to any "gurus". The markets tell their own story. Right now they are telling me things will get worse before they get long term better. No rush to get into bond funds right now, IMO. I don't believe the bottom is in yet, and most are not producing a distribution yield more than simple MM. At some point when the Fed signals a pivot, intermediate bond funds with their 15% losses will be a good place to recoup the NAV loss as the rates come down. As it was in 2009, it will be again.

Right now t-bills work fine with plenty of dry powder in MM for the inevitable pivot in equities. don't expect to get the bottom of either market, but I'm fine with that. I don't give advice and rarely take it, especially from "gurus" who often have conflicts.

[flipperxxx]

when buying tbills through a broker, are you buying on the secondary market and paying the tiny bid/ask spread or just going with the period auctions, no spreads, no fees?

[retiredat48]

Wow...reports on TV that someone placed a one million dollars futures bet, that the ten yr treasury yield would fall to 2.9% by December.

R48

[retiredat48]

BTW For those keeping money in Money Market Funds, consider this:

I can't cite the source of when, but guru Gundlach stated: "that the best FI total return during the decades of the seventies came from: Money Market Funds."

Disclosure: I also have money in Money Market Funds...and as reported during the last year, I am in my largest cash position, ever. Deciding when to take RMDs very easy this year.

R48

[mozart522]

Oct 12, 2022 19:41:58 GMT flipperxxx said:

when buying tbills through a broker, are you buying on the secondary market and paying the tiny bid/ask spread or just going with the period auctions, no spreads, no fees?

Yes.  All 6 months or under through Vanguard.

[Chahta]

Oct 12, 2022 21:29:06 GMT retiredat48 said:

Wow...reports on TV that someone placed a one million dollars futures bet, that the ten yr treasury yield would fall to 2.9% by December.

R48

Quite a bet but doable. It was 2.9 just 2 months ago and there are 2 months to go now. That would be a nice little Santa Claus rally.

[flipperxxx]

Oct 12, 2022 22:34:26 GMT mozart522 said:

Oct 12, 2022 19:41:58 GMT flipperxxx said:

when buying tbills through a broker, are you buying on the secondary market and paying the tiny bid/ask spread or just going with the period auctions, no spreads, no fees?

Yes.  All 6 months or under through Vanguard.

   yes what which?  iow, at V, are you buying secondary or via the auction, since presumably you can do both at V the way you can at schwab and fidelity, etc?

[mozart522]

Oct 13, 2022 12:11:44 GMT flipperxxx said:

Oct 12, 2022 22:34:26 GMT mozart522 said:

Yes.  All 6 months or under through Vanguard.

   yes what which?  iow, at V, are you buying secondary or via the auction, since presumably you can do both at V the way you can at schwab and fidelity, etc?

Just auctions.

[Chahta]

VIVA LA T-BILLS!

[Deleted]

I notice that yields in secondary market for 1-2 year treasury has gone up from 4.2% to 4.5%

[FD1000]

Do G & G have good explanations?
Why not get them tomorrow on TV and ask them about their opinions from months ago.
BTW, buying bond funds today is better than 6 months ago because prices keep diving.

I still can't find any uptrend I like.