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

[habsui]

More popcorn, please..

[retiredat48]

Mar 17, 2023 16:45:36 GMT FD1000 said:

Mar 17, 2023 14:52:01 GMT retiredat48 said:

FD1000 ,...why are you bringing SCHD and PDI into the measurements when this thread is titled: Is now the time for 2 yr treasury bond funds,FOR (one's)CASH.

R48

Because investors look at their whole portfolio.
So yes, treasuries have done well in the last 1-2 weeks, they still trailed other bond funds since the market turned on 11/2022.
BTW, just for info, what % of your total portfolio do you have in treasuries? 2-5%?

Completely irrelevant.  How SCHD has done, or what percent one owns, is irrelevant.  I repeat:

"why are you bringing SCHD and PDI into the measurements when this thread is titled: Is now the time for 2 yr treasury bond funds,FOR (one's)CASH.



And pass the popcorn please!

R48

[Norbert]

Stream of consciousness ...

[chang]

This thread is about "Is Now The Time for 2 YR Treasury Bond Funds...for Cash?", please keep it on topic. SCHD is off-topic.

[FD1000]

I agree that SCHD is too far from the thread topic but in this thread we already discussed 
Should you only consider performance? what about risk/volatility? what about the income? Is it your safe money? Do you use it for expenses?
R48 mentioned 5 year treasury too.

IMO, what is the % of total portfolio in MM/CD/treasury matters a lot in the last year and relates the above, especially for retirees. 
There is a huge difference between 2-3% to 20-30%. 

[chang]

Mar 22, 2023 16:13:52 GMT FD1000 said:

IMO, what is the % of total portfolio in MM/CD/treasury matters a lot in the last year and relates the above, especially for retirees. 
There is a huge difference between 2-3% to 20-30%. 

A question about an asset can be asked without any connection to what % of PV is invested in the asset. Otherwise, every posting about every asset will become a thread about Portfolio Design (and we have a separate PDM Board). % of PV is irrelevant, unless the question includes PDM analysis.

This thread is about "Is Now The Time for 2 YR Treasury Bond Funds...for Cash?" and % of PV is irrelevant.

Let's try not to turn every single question into the same thing.

[FD1000]

This is a bit different. Many retirees here have a big % in MM/CD/treasuries.
Do I want to own a 2 year treasury fund at 30% of my portfolio vs MM is different than 3%.
This is not like another stock or a bond fund.
Anyway, I'm not going to mention it but I think it matters.

[habsui]

Mar 22, 2023 17:01:56 GMT FD1000 said:

This is a bit different. Many retirees here have a big % in MM/CD/treasuries.
Do I want to own a 2 year treasury fund at 30% of my portfolio vs MM is different than 3%.
This is not like another stock or a bond fund.
Anyway, I'm not going to mention it but I think it matters.

Annoying..

[Norbert]

Mar 22, 2023 17:01:56 GMT FD1000 said:

This is a bit different. Many retirees here have a big % in MM/CD/treasuries.
Do I want to own a 2 year treasury fund at 30% of my portfolio vs MM is different than 3%.
This is not like another stock or a bond fund.
Anyway, I'm not going to mention it but I think it matters.

A zebra can't change its ...

1) mind

2) gender

3) stripes

4) doctor

[mozart522]

I'd say the answer is/was no to the original question. Since last March when this was started, VGSH is down 1.38%. T-bills and even MM were a much better choice for cash (market timing, in and out, adding and subtracting notwithstanding)

[Chahta]

My 2 cents always is, cash equals CDs, MM, Treasuries held to maturity. Never any kind of bond fund, even UST. However, show me a fund that the NAV never changes and I may reconsider.

[retiredat48]

Mar 23, 2023 14:46:05 GMT mozart522 said:

I'd say the answer is/was no to the original question. Since last March when this was started, VGSH is down 1.38%. T-bills and even MM were a much better choice for cash (market timing, in and out, adding and subtracting notwithstanding)

The answer was "NO...temporarily."  Few posters, if any,  bought at the original thread date.

Those following this thread saw buying of 2 year, and then 5-10 year treasuries ensued by some.  Some buying funds; some buying treasuries direct.  And those who bought "ladders" do not consider temporary mark-to-market change is meaningful to them, when they will not lose if held to maturity.  That is one of the values of two year versus a 30 year bond.  Maturity is just around the corner.  And those who bought 5-10 year treasuries are way ahead of MM Funds.

BTW expect a strong decline in MM Funds rates to be underway now.

R48

[mozart522]

retiredat48,

First of all, you said "A couple days ago, bond fund manager Jeff Gundlach recommended the two year Treasury bond as a good buy." That was not good advice because those folks are getting 2%+ for two years and are underwater now. Second, you said "I expect the 2 year treasury to peak around 2.6%" But that was not even close. Then you bought a fund instead of the note which actually lost money over the year and is riskier because it never matures. And now you are saying "BTW expect a strong decline in MM Funds rates to be underway now."

I don't believe that. Why would MM rates fall when the FED is raising rates and inflation is still at 6%?

[fishingrod]

I also expect Vanguard MM rates to rise to at least 4.70%, probably 4.77% until the next FED May 3rd decision. It shouldn't take them but about two weeks to get there.

[mikes425]

retiredat48 ,
Well, I'll chime in. I'm sitting in multiple ST bond funds with NAV losses on average of 9 to 14k after the worst year in bond history. The bond rule of thumb - prove me wrong if you can - is - you don't lose if you hold these investments. Dividend income is improving month by month. It may not be in a week, or a month...which seems to be the prevailing focus here - the 'short term' - but if you're in this for the long haul why should I fret about the machinations of the week to week or month to month machinations of this absurdly volatile market. I am going to be 65 in April. I'm young and have about a 2.7m assets balanced portfolio (50/50 AA) with ST bond funds. Is there really any compelling reason to 'worry' that the returns in MM vs these ST bond funds are a fractional percentage better or whatever...?  Guess I'm just kinda tired of buying into the day to day drama over this sh*t.

[Chahta]

Mar 24, 2023 23:52:36 GMT mikes425 said:

retiredat48 ,
Well, I'll chime in. I'm sitting in multiple ST bond funds with NAV losses on average of 9 to 14k after the worst year in bond history. The bond rule of thumb - prove me wrong if you can - is - you don't lose if you hold these investments. Dividend income is improving month by month. It may not be in a week, or a month...which seems to be the prevailing focus here - the 'short term' - but if you're in this for the long haul why should I fret about the machinations of the week to week or month to month machinations of this absurdly volatile market. I am going to be 65 in April. I'm young and have about a 2.7m assets balanced portfolio (50/50 AA) with ST bond funds. Is there really any compelling reason to 'worry' that the returns in MM vs these ST bond funds are a fractional percentage better or whatever...?  Guess I'm just kinda tired of buying into the day to day drama over this sh*t.

You are accumulating cheap (hopefully) shares for more income generation. Not sure vanilla ST bonds are the place to be now unless it is ST HY.

[mikes425]

Chahta , well, some is definitely ST HY but even with large-ish positions in SHY/SCHO - ST Treasury basically... I'm not going to worry too much about it on a long-term basis. They've taken big NAV hits. They also produce good dividend income.  Not accumulating. Just continuing to hold what I already had before -and since- 2022 basically.  As part of a diversified 'Balanced' portfolio.

[yakers]

Sounds like you're fine. You are young and in the accumulation phase, so hope for bigger declines if you have dry powder, portfoliio out of balance and an income flow. AFAIK the important things in financial planning are 1) saving/investing, 2) Asset allocation 3) everything else like best placement for taxes, expense ratios, fund choices. So you are young and saving/investing and have an AA that suits you. This is designed to minimize stress and active trading.
The best investments to hold can olny be known retroactively.
My version of avoiding drama is setting things so they will work for my wife who has little interest in things financial. So it needs to be simple and a way to avoid major mistakes. So I am slowly towards a one or two fund portfolio. This will 'cost' something, not doing it will cost a lot more.
Avoid major mistakes....you're doing fine.

[Deleted]

Currently, a .5 difference in yield on my cash is $800 annually. In the past, I've put much more effort for less money.
Moving between Money Markets, ST Treasuries, and ST brokerage CDs takes very little effort in this day and age. It's worth it to me.

[mozart522]

Yes, you can stay/get into ST bonds funds now, or you can collect 4.75% on MM in a week or so that may well go to 5-5.25% in two to three months while it lasts and then pick a better option. The Fed has indicated they will not cut rates this year. They also have indicated they will most likely continue to hike. The bank thing is being overblown in an attempt to get the Fed to take their eye off the ball; inflation, employment, and housing. Those who fight the fed do so at their own peril.

There is nothing wrong with staying the course and waiting it out. Personally, I'm staying the course in MM and T-bills until something wipes the fog off the mirror.

[mozart522]

retiredat48,

Waiting for you to explain why you expect a strong decline in MM to be underway now.

[richardsok]

Mar 27, 2023 13:29:03 GMT mozart522 said:

retiredat48 ,

Waiting for you to explain why you expect a strong decline in MM to be underway now.

+1

[mikes425]

Mar 25, 2023 15:21:11 GMT mozart522 said:

Yes, you can stay/get into ST bonds funds now, or you can collect 4.75% on MM in a week or so that may well go to 5-5.25% in two to three months while it lasts and then pick a better option. The Fed has indicated they will not cut rates this year. They also have indicated they will most likely continue to hike. The bank thing is being overblown in an attempt to get the Fed to take their eye off the ball; inflation, employment, and housing. Those who fight the fed do so at their own peril.

There is nothing wrong with staying the course and waiting it out. Personally, I'm staying the course in MM and T-bills until something wipes the fog off the mirror.

Ok. May I just ask you and the rest of the forum this. Hypothetically speaking. Let's say you have, right now, in mostly, a Taxable account,  the following ETFs which you've held, let's say...2 years on average, and they are 'core' holdings in the fixed income portion of a 50/50 AA PF.

285k in VCSH,  -3.65%  (since inception in the PF)  - NAV down 11k.
281k in SCHO, -2.1%  "  -   NAV down 5.6k
270k in SHY,  +1%   (held abt. 8 months) - NAV up 1k.
120k in SCHP (TIPS)  NAV dwn. 11k 

And, just to make it interesting, a smallish position in PFFD - Preferreds =  NAV down 30% 

Now the dividend return estimate, in this particular PF, with all assets "in" for that calculation - is roughly 80k for 2023.  

So those elements defined, what would be the pros/cons of exiting all of the above and investing the proceeds in a guaranteed 4 to 5%-return money market fund or, similar asset?  What are the "long term consequences" tax or otherwise, downside if I were to effectively take the loss in any/all of these NAV losers and put them in a 5% MM?  (tho their div. is improving).  

For background, I'm almost 65, slacking off on work income. PF total value of abt. 2.5m, no debt.

Thanks! Perhaps you can give help me present a great argument for an hourly FA who's never suggested any changes from this allocation (or not? - and that would be perfectly fine too: ) 

[FD1000]

Mar 27, 2023 23:41:42 GMT mikes425 said:

Mar 25, 2023 15:21:11 GMT mozart522 said:

Yes, you can stay/get into ST bonds funds now, or you can collect 4.75% on MM in a week or so that may well go to 5-5.25% in two to three months while it lasts and then pick a better option. The Fed has indicated they will not cut rates this year. They also have indicated they will most likely continue to hike. The bank thing is being overblown in an attempt to get the Fed to take their eye off the ball; inflation, employment, and housing. Those who fight the fed do so at their own peril.

There is nothing wrong with staying the course and waiting it out. Personally, I'm staying the course in MM and T-bills until something wipes the fog off the mirror.

Ok. May I just ask you and the rest of the forum this. Hypothetically speaking. Let's say you have, right now, in mostly, a Taxable account,  the following ETFs which you've held, let's say...2 years on average, and they are 'core' holdings in the fixed income portion of a 50/50 AA PF.

285k in VCSH,  -3.65%  (since inception in the PF)  - NAV down 11k.
281k in SCHO, -2.1%  "  -   NAV down 5.6k
270k in SHY,  +1%   (held abt. 8 months) - NAV up 1k.
120k in SCHP (TIPS)  NAV dwn. 11k 

And, just to make it interesting, a smallish position in PFFD - Preferreds =  NAV down 30% 

Now the dividend return estimate, in this particular PF, with all assets "in" for that calculation - is roughly 80k for 2023.  

So those elements defined, what would be the pros/cons of exiting all of the above and investing the proceeds in a guaranteed 4 to 5%-return money market fund or, similar asset?  What are the "long term consequences" tax or otherwise, downside if I were to effectively take the loss in any/all of these NAV losers and put them in a 5% MM?  (tho their div. is improving).  

For background, I'm almost 65, slacking off on work income. PF total value of abt. 2.5m, no debt.

Thanks! Perhaps you can give help me present a great argument for an hourly FA who's never suggested any changes from this allocation (or not? - and that would be perfectly fine too: ) 

If you look at your holdings you can see a loss and why the bird in the hand MM (example VFMXX pays now 4.68%) is a better choice.  Since I'm a trader based on markets, I don't believe in holding for years in bonds and based the markets in the last several years.
I never believed in FAs, as you found out diversification didn't help you because all 4 (VCSH...) were not right IMO, these choices have higher volatility/risk than MM, and made less money because rates were going up. Just because a bond is short term doesn't mean it's the right choice, losing less is still losing.
What to do now? I'm out in MM waiting for the next trade. Looks like rates are crawling up again.

[mikes425]

Mar 28, 2023 12:30:45 GMT FD1000 said:

If you look at your holdings you can see a loss and why the bird in the hand MM (example VFMXX pays now 4.68%) is a better choice.  Since I'm a trader based on markets, I don't believe in holding for years in bonds and based the markets in the last several years.
I never believed in FAs, as you found out diversification didn't help you because all 4 (VCSH...) were not right IMO, these choices have higher volatility/risk than MM, and made less money because rates were going up. Just because a bond is short term doesn't mean it's the right choice, losing less is still losing.
What to do now? I'm out in MM waiting for the next trade. Looks like rates are crawling up again.

But, to the point of my question, given the data provided, what would be the pro or con of making any sort of wholesale exit from the holdings "now" into a higher div. MM?  It would seem taking a guaranteed loss in exchange for the 'guaranteed/no-risk return, at this point  -might be questionable vs maintaining the longer-term perspective that maybe, one day, the div returns in these funds will be such that a loss will not be realized, and per the bond rule of thumb, I will get my original return. Not tomorrow or next week, but, unless everything melts down forever, eventually.(?)   Not particularly arguing the case either way - just looking for a rational pro/con perspective for analysis purposes.

[Chahta]

I guess I have never seen a reason to buy 2-year treasury funds. Seems pointless to buy instead of 2-year treasuries.

[archer]

Mar 28, 2023 14:18:56 GMT mikes425 said:

Mar 28, 2023 12:30:45 GMT FD1000 said:

If you look at your holdings you can see a loss and why the bird in the hand MM (example VFMXX pays now 4.68%) is a better choice.  Since I'm a trader based on markets, I don't believe in holding for years in bonds and based the markets in the last several years.
I never believed in FAs, as you found out diversification didn't help you because all 4 (VCSH...) were not right IMO, these choices have higher volatility/risk than MM, and made less money because rates were going up. Just because a bond is short term doesn't mean it's the right choice, losing less is still losing.
What to do now? I'm out in MM waiting for the next trade. Looks like rates are crawling up again.

But, to the point of my question, given the data provided, what would be the pro or con of making any sort of wholesale exit from the holdings "now" into a higher div. MM?  It would seem taking a guaranteed loss in exchange for the 'guaranteed/no-risk return, at this point  -might be questionable vs maintaining the longer-term perspective that maybe, one day, the div returns in these funds will be such that a loss will not be realized, and per the bond rule of thumb, I will get my original return. Not tomorrow or next week, but, unless everything melts down forever, eventually.(?)   Not particularly arguing the case either way - just looking for a rational pro/con perspective for analysis purposes.

To the question of taking a loss vs continuing on with your current holdings to realize the bond rule of thumb, can you compare how much you need to earn to break even vs time needed in  MM at current rate? Assumptions need to be made as to the future of MM returns, but it seems the Fed has given some vague projections as to when rates will level off and then start cutting. It is psychologically difficult for me to sell at a loss, but I try to overcome this tendency if I can reasonably expect better returns elsewhere.

[fishingrod]

Mar 28, 2023 15:26:33 GMT archer said:

Mar 28, 2023 14:18:56 GMT mikes425 said:

But, to the point of my question, given the data provided, what would be the pro or con of making any sort of wholesale exit from the holdings "now" into a higher div. MM?  It would seem taking a guaranteed loss in exchange for the 'guaranteed/no-risk return, at this point  -might be questionable vs maintaining the longer-term perspective that maybe, one day, the div returns in these funds will be such that a loss will not be realized, and per the bond rule of thumb, I will get my original return. Not tomorrow or next week, but, unless everything melts down forever, eventually.(?)   Not particularly arguing the case either way - just looking for a rational pro/con perspective for analysis purposes.

To the question of taking a loss vs continuing on with your current holdings to realize the bond rule of thumb, can you compare how much you need to earn to break even vs time needed in  MM at current rate? Assumptions need to be made as to the future of MM returns, but it seems the Fed has given some vague projections as to when rates will level off and then start cutting. It is psychologically difficult for me to sell at a loss, but I try to overcome this tendency if I can reasonably expect better returns elsewhere.

If I could give archer ,s comment more stars I would.

One has to do the math and some research. The prospect of getting back to even hits hard in investing when in a loss position. The main question at that time should be is there a better alternative that will be a better investment from this time forward in our opinion, because everything thing is opinion until it is fact. Sometimes it is better to stay the course, other times one needs to cut the cord and open up the other chute.

Investing is a psychological process, if we are doing it correctly. One has to challenge our initial urges and examine our next moves carefully.

[mikes425]

fishingrod , archer , Thanks. I think you've distilled it down to the essential question. I guess some mathematics are in order to answer it. As with predicting market performance, not my strong suit but as I interpret it, I need to assess the likely 'recovery' timeframe to get back to even as far as making up NAV loss versus cashing out of these funds -despite their improving div. return  and investing the proceeds into, say, a 5% no-risk MM or similar asset.  

[habsui]

For me, the only question is what is the better investment now.  It doesn't matter whether you own something at a loss or not.

If you think the bond funds/ETFs are better going forward, keep them.

Also, if they are in taxable accounts, taxes are a consideration on a sale. 

For myself, I have been moving out of MMs back into bonds, for example munis/TLT.  These positions are up close to 4% YTD, no homerun (not enough for a new boat yet) but better than MMs.