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Post by retiredat48 on Mar 28, 2022 16:50:13 GMT
Once a decision is made to invest in a space, the second question is the "when" part of actually making purchases.
I am likely to buy some 2 year treasury bonds in a fund wrapper.
However, I don't make it a habit to buy any "falling knives." Short term momentum always a factor. 2-yr has been terrible, falling in price (yield going up) almost daily (as noted by FD).
Judgment call will be what is perceived as a "compelling value" to start accumulating. Since we are talking of shorter term bonds, falling prices is viewed as more opportunity. The fund "weighted average price" of its bonds, now below par, may be key here. Built in capital gains.
I'm still waiting, but hand is on the trigger.
R48
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Post by Chahta on Mar 29, 2022 12:36:03 GMT
Why is a ST fund any different than a LT fund when rates are rising. ST just falls less but yields less. Still a loss. ICSH, GSY were frustrating last year til now because they kept falling.
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Post by FD1000 on Mar 29, 2022 21:00:30 GMT
Easy choice = NO. The trend is down, down and more down. This is the heart of the matter, and perhaps where FD and I see it differently. I am a big believer and user of momentum...FOR STOCK FUNDS. Not so for bond funds. Bonds are contractual instruments and do nothing more than , barring default, pay back an interest rate/dividend, for a set period to maturity, when a specific borrowed sum is returned. Thus, downward prices usually head towards better value for each bond. A "compelling value" price becomes the goal. The fact that momentum is now downward, simply means a march to more compelling value. So re FDs chart... --First, note while a large decline seems apparent, the y axis is only a 3% loss over almost a year. --Second, if Gundlach considered the 2 year a "buy" at 1.92%, then at 2.16% it is likely even a better buy (as the market bakes in a (new info)50 point rise in ff rate in May). --I am OK starting to buy at "compelling value" prices. --Sure, prices may go even lower to an absolute eventual bottom, but if I buy now at 2.15%, hold for up to 2 years, the odds are above 50% that the bond fund price will have stabilized and likely be HIGHER. This is because fed is likely to cause a recessions or stagflation (here now), and yields simply stop rising. History of bonds is yields do not go up/down in straight lines. Changes have an impact...like current mortgage rate of 4.75% is starting to adversely affect housing market...etc. --Lastly folks, remember the BOND RULE OF THUMB. Which is: If you buy a bond fund and hold to its duration (linked to maturity), your total return will closely approximate the starting yield, REGARDLESS OF THE DIRECTION OF INTEREST RATES. Meaning whether rates go up or down from here, ones total return will be close to 2.15%. It is like, if rates continue up, the fund buys more higher coupon bonds, offsetting the decline in bond prices; if rates go down, the bond prices go up, but one cannot buy higher coupon bonds. It all averages out! Enough for now... R48
Why do I want to buy treasuries? Rates have the highest influence on them. I prefer good managers to navigate it. Unfortunately, RPHIX is closed.
I believe in uptrend for all categories. The proof is with my portfolio 
But wait, if your formula is correct..."If you buy a bond fund and hold to its duration (linked to maturity), your total return will closely approximate the starting yield, REGARDLESS OF THE DIRECTION OF INTEREST RATES."...then why not buy the following funds with duration under 2 years and a starting yield of 4-5% which is double than treasuries. BTW, several of these funds are not complicated.
Maybe I should just buy these funds(ESHIX,DBLIX,ARTFX) and go to sleep with a guarantee of 5% annually in the next 2 years. |
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Post by retiredat48 on Mar 30, 2022 1:14:13 GMT
FD1000,...yes, you can. You can buy an active managed corporate bond fund, short duration, as well. I want treasury because: --I am only parking cash here...not an investment. --I consider I can make a little on NAV price, as I follow (am aware) of yields and I think 2 year may be overshooting. Like, given the yield in which I (eventually)buy, I consider in one year the yield will be LOWER, that is, an increase in 2 yr treasury bond prices. The goal is to capture the dividend, and a small capital gain. R48
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Post by fishingrod on Mar 30, 2022 17:14:49 GMT
"If you buy a bond fund and hold to its duration (linked to maturity), your total return will closely approximate the starting yield, REGARDLESS OF THE DIRECTION OF INTEREST RATES.".
This only applies to Treasury bond funds. The farther one strays from the Vanilla flavored bond funds the less the rule is applicable.
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Post by FD1000 on Mar 30, 2022 19:29:11 GMT
Next month will be good for treasuries, remember, we are talking about bonds. Edit/add: there will be no explanation.  |
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Post by archer on Mar 30, 2022 20:23:40 GMT
Next month will be good for treasuries, remember, we are talking about bonds. Please elaborate. This brings up a question I have had in the back of my mind for some years now. There is an inverse correlation between Fed rates which are adjusted a few times a year if at all, and the price of Ts and bonds. Yet prices go up and down daily. Interest rates are expected to be going up for the rest of the year. So, what would make treasuries go up next month? Fed rate in late 2018 should have tanked TLT due to it's long duration, but it didn't really follow the formula of duration x fed rate = price change. I have been in and out of TLT for a long time but there is an aspect to it which I have never grasped, so have treated it like any other investment using only TA, and paying little heed to fed rates until recently. |
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Post by Chahta on Mar 30, 2022 21:01:16 GMT
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Post by Capital on Mar 30, 2022 21:53:11 GMT
You can do the same with iShares iBonds I keep up with both iShares and Bullet Shares with a single watch at Fidelity. Comparing yields is easy to do that way. |
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Post by fishingrod on Mar 30, 2022 23:06:56 GMT
Not treasury but a unique corporate bond ETF.
I mentioned them earlier in this thread.
And the yield to worst call on some of them are not bad.
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Post by retiredat48 on Mar 31, 2022 1:07:34 GMT
Next month will be good for treasuries, remember, we are talking about bonds. Please elaborate. This brings up a question I have had in the back of my mind for some years now. There is an inverse correlation between Fed rates which are adjusted a few times a year if at all, and the price of Ts and bonds. Yet prices go up and down daily. Interest rates are expected to be going up for the rest of the year. So, what would make treasuries go up next month? .... Hi archer...like anything else, bonds are traded on the open market. They do not go up and down in a straight line. It would be so easy if they were CDs...small upward total return, going in straight lines. But you technically cannot sell CDs to others...they are personally owned. Fact is, a market can instantly bake in future prices in anticipation of the future rates. That is the key. You said: interest rates going up for rest of year. But maybe not. And investors can see where the future rates are heading, so they buy/sell now accordingly. Called "buying on the rumor, selling on the news." 2 year has had a major swift price decline (yield rise). So if fed announces a 50 basis point hike in May, do not be surprised if 2 year rates fall the next day, and continue downward for a period. The fed controls the near curve, but not the longer duration stuff. If a recession occurs, the longer bonds may actually decline in rates (prices go up). Markets ANTICIPATE SUCH MOVES. R48 |
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Post by Chahta on Mar 31, 2022 1:14:13 GMT
Not treasury but a unique corporate bond ETF.
I mentioned them earlier in this thread.
And the yield to worst call on some of them are not bad.
Wasn’t trying to plagiarize you. I think I saw an article on Yahoo Finance or another financial site. I should have read your posts. |
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Post by fishingrod on Mar 31, 2022 1:23:47 GMT
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Post by retiredat48 on Mar 31, 2022 1:51:22 GMT
"If you buy a bond fund and hold to its duration (linked to maturity), your total return will closely approximate the starting yield, REGARDLESS OF THE DIRECTION OF INTEREST RATES.". This only applies to Treasury bond funds. The farther one strays from the Vanilla flavored bond funds the less the rule is applicable. The "Bond Rule of Thumb" has been proven out by many, many formal studies. Yes, if you buy a go anywhere, do anything bond fund, the manager can completely change the bond makeup/profile and affect future returns. But most bond funds are like: "Intermediate term, AA or better rated, Corporate Bonds" And managers typically stick to their knitting. R48 |
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Post by mozart522 on Apr 1, 2022 19:05:12 GMT
And the iShares iBond version has a treasury ladder. Looking at the two corporate versions, Bulletshares seem to have a higher credit quality. |
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Post by retiredat48 on Apr 1, 2022 22:36:40 GMT
Two year Treasury bond up to 2.45% yield today.(Bond prices falling).
Has paid off to wait...so far.
The biggest decision I see is whether or not to wait until May fed meeting, at which time a 50 basis point rise in fed funds rate will likely be announced..AND the degree the fed announces the balance sheet runoff details, if any.
This would be a good inverse of "buy the rumor; sell the news." You buy on the day of the "bad news"--higher rates announced by the fed.
Trouble is, the 2 year may peak in rates before that May date. I consider if one buys the 2 yr bond funds now, or in MAY, you will be ahead if held for one year. The decision of buying now, or in May, is the "art part" of investing!
R48
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Post by retiredat48 on Apr 6, 2022 17:10:03 GMT
Thanks to uncleharley...here is chart of two year rates: linkstockcharts.com/h-sc/ui?s=$UST2Y&p=W&b=3&g=0&id=p50939252958&a=478725602&listNum=86 2 yr yield about 2.5% currently. Ten year yield back above 2 yr. R48 |
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Post by uncleharley on Apr 6, 2022 17:21:05 GMT
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Post by FD1000 on Apr 6, 2022 20:11:39 GMT
Easy choice = NO. The trend is down, down and more down. 2 weeks later and..The trend is down, down and more down. Attachments:
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Post by retiredat48 on Apr 7, 2022 0:48:58 GMT
Easy choice = NO. The trend is down, down and more down. 2 weeks later and..The trend is down, down and more down. Indeed. And no-one has bought, bought, and bought more! Investors are cautioned to always be aware of "technicals"...such as falling markets; seeking bottoms; trend reversals, when starting new positions. Due to fed officials talking , it appears market is building in more than one 50 bp hike. So, if we assume three 50 bp changes, the fed hike to Dec could be to 2.5-2.75%. Gundlach would then put the 2 year at 3%. But will fed even hit the top range of increases, as the economy may fold before hand. I can easily see a delay in the period before mid-term elections. Fed does not want to be the poster-boy for a recession...at least not until after the election. Not an easy call on where to start buying. I'm determining a "compelling value" to take an initial position. But we are talking short term bond funds (not stock funds), and the selloff is viewed by me, as "an opportunity." R48 |
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Post by archer on Apr 7, 2022 0:58:10 GMT
Yeah, those darn trend reversals! They get me more often than not. :-)
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Post by FD1000 on Apr 7, 2022 3:53:36 GMT
Yeah, those darn trend reversals! They get me more often than not. :-) My first rule is to follow my fastest indicator called 3 break line. See SPY( link). Red bar=sell (we got it today). Green bar=buy. Instead of SPY use VGSH = all red bars. Attachments:
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Post by archer on Apr 7, 2022 4:40:30 GMT
FD1000 , I spotted the change this morning in the 3 line break and came close to selling on it. Decided to wait until tomorrow and see what gives. Last year I used the 3 line a few times and each time sold low and bought high on the next green bar. I remember an early version of your "Investing and my basic system", where you said "sometimes you have to convince yourself your doing better". I took that to heart.  Too bad I didn't heed the 3/17 signal.
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Post by retiredat48 on Apr 13, 2022 20:05:21 GMT
Recently took a goodly starting position in VGSH, Vang'd Short Term Gvt. Bond etf/Fund.
BTW I noticed Josh Brown (CNBC) recently chose the 2 year treasury as the investment of choice, currently, for buy and holders.
R48
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Post by Capital on Apr 13, 2022 22:04:40 GMT
I'm looking at yields on Treasuries and Brokerage CDs at Fidelity right now.
I see the 2-year rates at 2.4% for both.
If you go lower on the maturity side Treasuries yield more.
If you go higher on the maturity side the CDs yield more.
The only difference is that the 2-year CDs at 2.4% are not call protected. You have to give up 5bp to buy call protection.
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Post by Chahta on Apr 13, 2022 23:16:26 GMT
Not sure I would tie up money for 2 years at 2%. You can do that with RPHIX for 1 week.
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Post by Capital on Apr 14, 2022 9:29:00 GMT
Not sure I would tie up money for 2 years at 2%. You can do that with RPHIX for 1 week. , currently I am not going out past 90 days. The 25bp increase raised rates rapidly. A 50bp raise and maybe we will start to see bank rates come off 1bp. Vanguard MM (VMFXX) has already climbed from 1bp to 20bp. Current 90-day CDs are at 40bp. The 6-month CDs are at 90bp; but, I think 90-day CDs will top that after the next rate increase. |
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Post by retiredat48 on Apr 15, 2022 1:47:28 GMT
Not sure I would tie up money for 2 years at 2%. You can do that with RPHIX for 1 week. I'm not investing for two years. I posted the following to Sara on the B/S/W thread: My post here states it was bought as a "CASH HAVEN." So I don't plan to own it for three years. Perhaps from 6 months to a year, awaiting opportunities to deploy this cash. This is compared to holding let's say a money market fund. In the bond forum I have a thread going discussing in more depth the why of the 2 year treasury investing. Basically, in my five decades of investing, instead of money market funds, I would park my money in longer term bond funds, accepting the NAV price fluctuation while capturing the yield. On average, this paid off, as mostly when stocks decline, bonds rise in price...and the reverse is often the case also. Yes, sometimes a small decline in NAV price. IOW I am betting that in 6 months to a year, the total return on 2 yr treasury fund will be positive and exceed money market funds. R48 |
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Post by retiredat48 on Apr 23, 2022 3:31:49 GMT
In another thread, I posted this:
mozart522 ,
Yes, a small decline so far. I made one purchase, and since then, we have the fed getting even more hawkish, and recently Powell announcing the fed may go "above the neutral rate." This is quite a pivot.
The neutral rate is viewed as 2.5%. If fed was at neutral, the 2 yr treasury follows that rate closely, so expected 2.6% at about good compelling value. Now however, if go above neutral, that may mean fed rate at 3% (by year end)...and a 2 yr treasury at 3-3.2%. So two yr has fallen further,(Yield toDay High2.789%; Yield Day Low2.69%; Yield Close2.69%;note we had a rally at the close.
So I plan to buy more. The question is now, with a pretty compelling yield, OR wait until the May fed meeting, when they announce 50 bp increase (or 75), ie, buy on the "bad news."
I decide every day!
The market will not "ring a bell" when the 2-year has peaked. But the higher it goes, the quicker and more severe a recession may be in the cards...and the fed rate either stopped increasing, or actually lowered.
R48
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To which mozart replied: "retiredat48, I don't disagree with that. I think you will do fine. But I ask myself, "how much will I really get in either income or price appreciation on VGSH over the next 6 months as opposed to sitting in cash". My answer is not enough at this point for the risk (although admittedly small). And to get anything worthwhile, I would have to take a large commitment, which of course, increases the potential risk. I'm waiting for intermediates to be a compelling, lower-risk buy with my cash."
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Post by Chahta on Apr 24, 2022 12:31:12 GMT
Next month will be good for treasuries, remember, we are talking about bonds. Edit/add: there will be no explanation. Almost 1 month....... |
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Too bad I didn't heed the 3/17 signal.