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Post by Chahta on Jun 3, 2022 13:22:49 GMT
"the generic formula for bond fund: a bond fund performance would be it's yield per the duration."
Is that true for tricked-up bond funds or only vanilla bond funs?
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Post by FD1000 on Jun 3, 2022 13:23:47 GMT
"the generic formula for bond fund: a bond fund performance would be it's yield per the duration." Is that true for tricked-up bond funds or only vanilla bond funs? Much better for vanilla funds, but even if it's off a bit, I'll take it. I don't believe MWFSX will make 9% annually in the next 3 years, otherwise, I would invest all my money in it. |
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Post by fishingrod on Jun 3, 2022 13:26:46 GMT
The rule works best when applied to strictly US Treasury funds.
As one veers away from that the rule does not apply as well.
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Post by chang on Jun 3, 2022 13:35:34 GMT
"the generic formula for bond fund: a bond fund performance would be it's yield per the duration." Is that true for tricked-up bond funds or only vanilla bond funs? Clearly the "rule" breaks down in certain regimes. For instance, what about negative duration funds? The fund should have paid me a dividend before I even thought of investing in it. It seems to me that it clearly breaks down for high-yield / short duration funds, as FD noted, and for all funds during periods of excess volatility. |
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Post by archer on Jun 3, 2022 16:04:08 GMT
For long term Treasuries, the yield in 1985 was ~15% annualized gains over the next 20 yrs came in at only 11%. LinkStill, the best time to buy was when yields were highest. So, for the strategy of buying bond funds based on yield and duration, which category of bonds has the most favorable relationship for fitting FD's formula? |
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Post by fishingrod on Jun 3, 2022 16:59:44 GMT
I think once one gets into riskier bonds and farther from bonds of little or no credit risk the calculation of duration is not as simple.
One gets into the calculations of spread duration and credit spread duration in those cases.
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Post by mozart522 on Jun 3, 2022 18:19:56 GMT
I think once one gets into riskier bonds and farther from bonds of little or no credit risk the calculation of duration is not as simple. One gets into the calculations of spread duration and credit spread duration in those cases. I agree because the rule works best when price movements are only based on rate changes or anticipated rate changes and not credit risk. Very highly rated corp bonds will hold close to the rule as long as there are not huge call risk. And, of course, it assumes that all interest is reinvested. |
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Post by retiredat48 on Jun 3, 2022 18:37:37 GMT
Here's the last post I made regarding the rule-of-thumb:
But I don't think anyone should take the Rule of Thumb from me. Count my input as zero. For all of my investing techniques and tools, I cite a host of guru references. And regarding poster "elder" who cites a long thread a couple years back. If you review that thread carefully, and follow later threads on the Rule, you will see that many posters now acknowledge the Rule exists, is generally on target, and is in industry-wide practice. I could name names.
Here is just one excerpt from backtesters, by RAfI/PIMCO'S Robert Arnott, who did a lot of work with rising rates with Emerging Market Bonds. Key here is EM bonds have huge rates swings ( not tiny 3/8% point changes). Arnott is a well recognized bond manager guru, who is also noted for his extensive backtesting and studies on investing.
Arnott provides a comparison, for the past two decades that the JP Morgan Emerging Market Bond Index was created, of total annual returns five years later, for all of the initial starting yields. Here are some snippets:
"Arnott: Let's look at Emerging Market Bonds, which have been a fairly consistent exposure to All Asset strategies...The JP Morgan EM Bond Index posted its second worst quarter since 1997 with a return of -6.3%. But this tells us little about long term performance...Figure 1 shows the starting yield to maturity of the JP Morgan EM Bond Index (the dark blue line) and the five year subsequent return from that starting yield (the dark blue line) from the inception of the index 1994 through 2013. Obviously this 20 year stretch covers the good, the bad and the ugly of EM bond investing.
What do we find? Our starting yield very closely approximates the return we can expect over the next five years--the correlations run at 87%."
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Continuing...another RECENT example: Here's from Vanguard Income Strategy Group:
"A rule of thumb for fixed income investors is that if your time horizon is longer than a bond's duration, you stand to benefit from rising interest rates. When interest rates rise, bond prices fall, which will result in short-term losses. But those losses will be offset by higher returns on reinvested income into higher-yielding bonds. In any environment, it's important to stay focused on your long-term goals, maintain the right mix of diversified stocks and bonds, and rebalance your portfolio when necessary".
"
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Lastly, just for fun, here's what Daniel Weiner Newsletter, who did some backtesting, wrote on their results:
Can the yield on a bond fund accurately predict how that fund will perform over the next five to ten years? Some, including one of Vanguard's bond pros, say it can.
It's an interesting theory, and one that I've heard repeated a number of times over the years, most recently in a live Webcast that Vanguard hosted near the end of January.
During the course of the discussion, Christopher Alwine, who manages the Vanguard Long-Term Tax-Exempt (VWLTX) and High-Yield Tax-Exempt (VWAHX) funds, mentioned in passing that a bond fund's current yield gives the "best estimate" of what you can expect it to return over the next five years.
This reminded me of a similar theory that Vanguard founder Jack Bogle has mentioned a number of times, which posits that a bond fund's yield is an excellent proxy for its return over the following ten years.
Since any investor would love to have a crystal ball in which to divine the future of his or her investments, I thought I'd investigate these theories and see if they hold up against real-world returns.
To test Bogle's and Alwine's assertions, I looked at month-end SEC yields for all of Vanguard's bond funds from November 1993 to January 2006, as well as the subsequent five- and ten-year returns for those funds. Simple subtraction (the return minus the yield) gives a fairly good idea of just how close a fund's yield comes to predicting its future return.
With enough historical data to look at 87 different ten-year periods and 147 different five-year periods for a majority of Vanguard's bond funds (some are too young), I think it's possible to come to some preliminary conclusions, at least. I should note that in all cases except one (High-Yield Corporate (
VWEAX)) the absolute yield and return numbers are in the mid-to-low single digits, so even 0.5% can be a pretty big difference.
What you'll see in the summary at the bottom is that Bogle is probably closer to being right than Alwine. Obviously, a bond fund's yield won't be a perfect crystal ball on the future, but the wider gap between the range of outcomes over five years versus those over ten years gives Bogle's back-of-the-envelope calculation a bit more validity.
This general rule that a fund's yield will predict its ten-year return far better than its five-year return seems to hold throughout the taxable and tax-exempt funds. The one other general observation is that, on average, the five-year returns were almost all slightly higher than the funds' yields would have suggested—
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R48 closing: I have many, many references to the Rule of Thumb, as well as formal academic backtesting of same. The only place where some controversy exists is with a few certain M* Forum members.
The Rule of Thumb is one of the top ten tools I consider I have in my investing tool-box. Come to grips with this, conclude for yourself, and you may decide the same.
R48
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Post by retiredat48 on Jun 3, 2022 19:44:02 GMT
I have a goodly amount of money in cash/short term investments, awaiting deployment. Patience is the code word for this money. A couple days ago, bond fund manager Jeff Gundlach recommended the two year Treasury bond as a good buy. Rate then was about 1.92%...yesterday close was 2.158%, partly in reaction to fed stating may go 50 basis points up in fed funds rate at next meeting. So is this a good buy...and is timing now? Also, what is a good Fund or ETF owning 2 year Treasuries? Gundlach had a graph showing historically, the fed funds rate and the 2 year Treasury followed very closely. Since the fed plans to increase rates 6 more times, and assuming one is 50 basis points, then the fed funds rate gets to 2% this year. Expect a two year treasury to be slightly higher rate. I also expect the ten year Treasury to peak around 2.6%...and note the 2/10 spread is very low; about 0.21% now. Over several decades, when I exited funds, in lieu of parking monies in MM Funds, I mostly bought long term corporate bond funds, taking a higher yield, and accepting that NAV fund price would float. Most of the time, I exited with small price gains, as well as higher interest received. Occasionally not so. But I captured more yield. So going out to two years is not a great risk to me. Like, I'll take the 2.16% interest for a year, and live with a floating fund price. That compares to a money market fund that may be 0.5% yield, and no price change. Your thoughts? Timing now?...a good Fund/ETF? TIA R48 Observations: 1) Gundlach timing wasn't good on March 23rd. R48 comment about waiting for 2.6% was a lot better. 2) R48, I have a question for you. You mentioned several times before the generic formula for bond fund: a bond fund performance would be it's yield per the duration. If this is correct, then why not invest in?... RSIIX: yield > 5%...duration<2. This means you will get 5% annually in the next 2 years. See the list below for several more funds
TICKER...YIELD...DURATION.....CATEGORY (YIELD = TRAILING + 30 DAYS SEC)RSIIX.......5+.........1.9.............UNIQUE HY DBLIX.......5-7........1.2.............MULTI(MOSTLY MBS) EIFAX......4.3-4.7....0.4.............BANK LOANS SPFYX.......4-5........0.3.............BANK LOANS MWFSX......9-10......2.9.............MULTI BTW, rates continue upward. I would still wait, maybe until the next second Fed raise next month. I can't be an expert under the hood on all bond funds. Here's my observation on the ones you listed. I have had bad experiences with BANK LOAN FUNDS. Can't get them to act as I expect. Poor performance in rising rate environment. Will not own infuture. RSIIX is mostly junk...50% in unrated bonds. Extreme risk if we have an economic downturn or recession, and a major default occurs (which I expect). MFSIX...horrible chart in current downturn. Questions under hood. DBLIX if mostly MBS as you state...risk due unknown impact of fed tightening by reducing balance sheet...selling off mortgage backed securities. General...A lot of these funds have very high expense ratios as well. ------------------------- Remember, this thread is about holdings for CASH positions. I do not expect to hold 2-5 years. These FD1000 funds too iffy. Consider the two year treasury the sweet spot for now. Please propose other candidates...and why. I can change my mind quickly. R48 |
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Post by retiredat48 on Jun 3, 2022 19:48:38 GMT
I think once one gets into riskier bonds and farther from bonds of little or no credit risk the calculation of duration is not as simple. One gets into the calculations of spread duration and credit spread duration in those cases. I agree because the rule works best when price movements are only based on rate changes or anticipated rate changes and not credit risk. Very highly rated corp bonds will hold close to the rule as long as there are not huge call risk. And, of course, it assumes that all interest is reinvested. There is merit here. Credit risk on junk type holdings is a factor. That is why NO for cash type holdings. If we get a recession, expect a major default that scares everyone, and hurts junk a lot. People will run to treasuries, thus why the two year is in the "sweet spot." R48 |
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Post by retiredat48 on Jun 3, 2022 19:58:46 GMT
"the generic formula for bond fund: a bond fund performance would be it's yield per the duration." Is that true for tricked-up bond funds or only vanilla bond funs? This is not the same as the bond rule of thumb, which is total annual return is the STARTING YIELD, held for the duration. R48 |
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Post by Deleted on Jun 3, 2022 20:35:53 GMT
I treat cash as cash as in a federal money market fund which will not float its NAV. FED fund increases will affect short term rates, so the money market rates will respond sooner with higher distributions than will a 2-year bond fund.
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Post by mozart522 on Jun 3, 2022 21:08:53 GMT
I treat cash as cash as in a federal money market fund which will not float its NAV. FED fund increases will affect short term rates, so the money market rates will respond sooner with higher distributions than will a 2-year bond fund. But the 2 year bond fund is starting at 2.5 and Fed MM is at .8 or so. |
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Post by Deleted on Jun 3, 2022 21:22:47 GMT
I treat cash as cash as in a federal money market fund which will not float its NAV. FED fund increases will affect short term rates, so the money market rates will respond sooner with higher distributions than will a 2-year bond fund. But the 2 year bond fund is starting at 2.5 and Fed MM is at .8 or so
However, the bond fund NAV (price) will drop with the projected FED tightening needed to tame inflation. Bond funds don't fare well in rising rate environments as we have witnessed this year, and the process is in the early stages. |
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Post by mozart522 on Jun 3, 2022 21:52:22 GMT
But the 2 year bond fund is starting at 2.5 and Fed MM is at .8 or so
However, the bond fund NAV (price) will drop with the projected FED tightening needed to tame inflation. Bond funds don't fare well in rising rate environments as we have witnessed this year, and the process is in the early stages. But the price has already dropped 4% since last august in anticipation for the Fed hikes. That means more than a 2% hike is already baked in. With the June and July .5 bumps, we will still only be at 1.75%. Meanwhile distributions are up 43% this month. If the price drops 1% with the .5 bump then the yield will rise and I would likely buy more. The yield will continue to rise as long as the Fed hikes, and then the prices will rise as the fed eventually lowers. As R48 pointed out, either because the FED hikes too much, or because inflation stays too high, if we have a recession, then treasuries historically do well. VGSH is a reasonable investment for some of my cash now. |
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Post by anitya on Jun 3, 2022 22:04:55 GMT
Just an FYI -
At TD and Schwab, the sweep account is a bank deposit which pays zero interest. Their MM funds currently paying up to 0.60% are available to purchase for $1. For $1M minimum, the 7-day yield is higher. One has to buy and sell these Schwab MM fund like any other mutual funds.
At Fidelity the sweep account is a Federal MM fund that currently pays 0.46%. Higher (0.55%) paying MM fund is SPRXX. Please check with a Fidelity Rep to see if SPRXX automatically sweeps out to buy other securities or you have to affirmatively sell SPRXX to fund other purchases - which can be important to avoid margin interest / to include in purchasing power. A couple of years ago, SPRXX was included in the purchasing power, eliminating the requirement to call a Fidelity Rep to place buy orders of other securities.
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Post by fishingrod on Jun 3, 2022 22:54:15 GMT
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Post by mozart522 on Jun 3, 2022 23:12:09 GMT
Just an FYI - At TD and Schwab, the sweep account is a bank deposit which pays zero interest. Their MM funds currently paying up to 0.60% are available to purchase for $1. For $1M minimum, the 7-day yield is higher. One has to buy and sell these Schwab MM fund like any other mutual funds. At Fidelity the sweep account is a Federal MM fund that currently pays 0.46%. Higher (0.55%) paying MM fund is SPRXX. Please check with a Fidelity Rep to see if SPRXX automatically sweeps out to buy other securities or you have to affirmatively sell SPRXX to fund other purchases - which can be important to avoid margin interest / to include in purchasing power. A couple of years ago, SPRXX was included in the purchasing power, eliminating the requirement to call a Fidelity Rep to place buy orders of other securities. Vanguard's Federal MM is currently .70% |
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Post by Chahta on Jun 3, 2022 23:20:37 GMT
When do you figure you will be paid $0.10 per month? Right now the distribution is $0.04. 2.5% compounded is about $0.10 per month.
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Post by mozart522 on Jun 4, 2022 2:25:36 GMT
When do you figure you will be paid $0.10 per month? Right now the distribution is $0.04. 2.5% compounded is about $0.10 per month. What I figure is that if I hold it for 2 years (the duration), I will have gotten a total return of 2.5% per year when the two years are up. I don't know if the monthly distribution will ever hit .10, and it doesn't matter. I'm not spending the distributions. |
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Post by FD1000 on Jun 4, 2022 3:58:03 GMT
I treat cash as cash as in a federal money market fund which will not float its NAV. FED fund increases will affect short term rates, so the money market rates will respond sooner with higher distributions than will a 2-year bond fund. But the 2 year bond fund is starting at 2.5 and Fed MM is at .8 or so. I just found something fundamental. VGSH doesn't pay anything close to 2.5%. It pays a lot less. 30 days sec yield = 2.5% What is it? "A non-money market fund's SEC yield is based on a formula mandated by the Securities and Exchange Commission (SEC) that calculates a fund's hypothetical annualized income as a percentage of its assets. A security's income, for the purposes of this calculation, is based on the current market yield to maturity (for bonds) or projected dividend yield (for stocks) of the fund's holdings over a trailing 30-day period. This hypothetical income will differ (at times, significantly) from the fund's actual experience; as a result, income distributions from the fund may be higher or lower than implied by the SEC yield." What is actually the yield? less than 1% now if it stays the same. See attachment below. The last dist was 0.04 (and higher from the previous one of 0.029). 0.04 times 12 months = 0.48. The NAV=59....(0.48 / 59) *100 = 0.8% annually. I never looked deeply into 30 days sec yield and maybe I'm completely off (midnight now), but it's too far to be accurate in this case. The monthly dist must go from 0.04 to about 0.12 which is 3 times higher. Attachments:
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Post by anitya on Jun 4, 2022 6:22:11 GMT
Just an FYI - At TD and Schwab, the sweep account is a bank deposit which pays zero interest. Their MM funds currently paying up to 0.60% are available to purchase for $1. For $1M minimum, the 7-day yield is higher. One has to buy and sell these Schwab MM fund like any other mutual funds. At Fidelity the sweep account is a Federal MM fund that currently pays 0.46%. Higher (0.55%) paying MM fund is SPRXX. Please check with a Fidelity Rep to see if SPRXX automatically sweeps out to buy other securities or you have to affirmatively sell SPRXX to fund other purchases - which can be important to avoid margin interest / to include in purchasing power. A couple of years ago, SPRXX was included in the purchasing power, eliminating the requirement to call a Fidelity Rep to place buy orders of other securities. Vanguard's Federal MM is currently .70% va Yep. That is their sweep fund and I think their highest yielding MM fund. Vanguard always has one of the highest MM yields for the retail investor. Investors need to pay attention to TD and Schwab cause there the sweep is a no interest earning bank account and many investors just leave money in the sweep account. |
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Post by chang on Jun 4, 2022 9:06:51 GMT
I never use SEC 30D figures. They fluctuate wildly based on recent payout patterns. The 12 month distribution yield has always seemed to me to be a more reliable figure.
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Post by Capital on Jun 4, 2022 11:27:24 GMT
I'm still buying and laddering 3-month T-Bills. Yields are not great but at 131bp it is still more that the 25pbp that my cash in my Fidelity CM account earns. I like the 3-month liquidity and have been watching rates move very quickly. Until I see the FED abating from its hawkish stance on interest rates, I will stay with this. The last 50pb increase saw the yield in Fidelity CM FDIC insured accounts go from 1bp to 25bp and 3-month CDs and Treasuries jumped somewhere in the neighborhood of 40bp. I honestly have no idea where the FED will quit. The FED is normally late in changing their direction and overshoot. The markets seem to always see the future before the FED. Due to an inheritance, I have moved from having substantial floating rate debt about 6 months ago to having floating rate cash today. I plan to live the rest of my life without substantial floating rate debt. I have enjoyed the change to holding floating rate cash.  |
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Post by Deleted on Jun 4, 2022 12:12:49 GMT
I'm still buying and laddering 3-month T-Bills. Yields are not great but at 131bp it is still more that the 25pbp that my cash in my Fidelity CM account earns. I like the 3-month liquidity and have been watching rates move very quickly. Until I see the FED abating from its hawkish stance on interest rates, I will stay with this. The last 50pb increase saw the yield in Fidelity CM FDIC insured accounts go from 1bp to 25bp and 3-month CDs and Treasuries jumped somewhere in the neighborhood of 40bp. I honestly have no idea where the FED will quit. The FED is normally late in changing their direction and overshoot. The markets seem to always see the future before the FED. Due to an inheritance, I have moved from having substantial floating rate debt about 6 months ago to having floating rate cash today. I plan to live the rest of my life without substantial floating rate debt. I have enjoyed the change to holding floating rate cash.  Whatever 'floats' your boat  |
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Post by mozart522 on Jun 4, 2022 12:34:58 GMT
But the 2 year bond fund is starting at 2.5 and Fed MM is at .8 or so. I just found something fundamental. VGSH doesn't pay anything close to 2.5%. It pays a lot less. 30 days sec yield = 2.5% What is it? "A non-money market fund's SEC yield is based on a formula mandated by the Securities and Exchange Commission (SEC) that calculates a fund's hypothetical annualized income as a percentage of its assets. A security's income, for the purposes of this calculation, is based on the current market yield to maturity (for bonds) or projected dividend yield (for stocks) of the fund's holdings over a trailing 30-day period. This hypothetical income will differ (at times, significantly) from the fund's actual experience; as a result, income distributions from the fund may be higher or lower than implied by the SEC yield." What is actually the yield? less than 1% now if it stays the same. See attachment below. The last dist was 0.04 (and higher from the previous one of 0.029). 0.04 times 12 months = 0.48. The NAV=59....(0.48 / 59) *100 = 0.8% annually. I never looked deeply into 30 days sec yield and maybe I'm completely off (midnight now), but it's too far to be accurate in this case. The monthly dist must go from 0.04 to about 0.12 which is 3 times higher. While the average coupon is 1.2% currently, the YTM is 2.66% because the duration is 1.9 and the average weighted price is 97.3 or 2.7% below par. The NAV will rise to 100 as the bonds in the fund mature. This is taken into account when the SEC yield is calculated. Of course, it is just a 30 day look at potential future earnings. But for a short term bond fund, with no credit risk, it is probably in the ball park. Here is a post ans discussion from the smartest kid in the room (yogibearbull) from M*. Interestingly, some of the same players on this thread were on that one.: community.morningstar.com/s/question/0D53o00005E8XccCAF/30day-sec-yield-for-bond-funds |
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Post by yogibearbull on Jun 4, 2022 12:42:11 GMT
The 30-day SEC yield indicates POTENTIAL future TR of the bond funds and is basically a STANDARDIZED YTM. It can be used for the bond rule-of-thumb that works best for investment-grade bonds. Details on 30-yr SEC yield are buried in this long SEC Form N-1A, pg 58-60 (for those who want to learn  ). It is of course NOT the current distribution yield, nor the TTM yield. www.sec.gov/about/forms/formn-1a.pdf |
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Post by FD1000 on Jun 4, 2022 13:58:08 GMT
I just found something fundamental. VGSH doesn't pay anything close to 2.5%. It pays a lot less. 30 days sec yield = 2.5% What is it? "A non-money market fund's SEC yield is based on a formula mandated by the Securities and Exchange Commission (SEC) that calculates a fund's hypothetical annualized income as a percentage of its assets. A security's income, for the purposes of this calculation, is based on the current market yield to maturity (for bonds) or projected dividend yield (for stocks) of the fund's holdings over a trailing 30-day period. This hypothetical income will differ (at times, significantly) from the fund's actual experience; as a result, income distributions from the fund may be higher or lower than implied by the SEC yield." What is actually the yield? less than 1% now if it stays the same. See attachment below. The last dist was 0.04 (and higher from the previous one of 0.029). 0.04 times 12 months = 0.48. The NAV=59....(0.48 / 59) *100 = 0.8% annually. I never looked deeply into 30 days sec yield and maybe I'm completely off (midnight now), but it's too far to be accurate in this case. The monthly dist must go from 0.04 to about 0.12 which is 3 times higher. While the average coupon is 1.2% currently, the YTM is 2.66% because the duration is 1.9 and the average weighted price is 97.3 or 2.7% below par. The NAV will rise to 100 as the bonds in the fund mature. This is taken into account when the SEC yield is calculated. Of course, it is just a 30 day look at potential future earnings. But for a short term bond fund, with no credit risk, it is probably in the ball park. Here is a post ans discussion from the smartest kid in the room (yogibearbull) from M*. Interestingly, some of the same players on this thread were on that one.: community.morningstar.com/s/question/0D53o00005E8XccCAF/30day-sec-yield-for-bond-fundsI like to think in simple terms. I'm quite sure VGSH will not produce 2.5% in the next year, unless rates will go down if rates are equal or higher, it will not make 2.5%. That's the difference between actual and potential. I will follow up next year on June 1st. It's already behind substantially where dist now are at 0.04 while they need to be tripled. So, every month that passes and dist are not at 0.12, the likelihood of making it will go down. Let the race begin.  |
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Post by mozart522 on Jun 4, 2022 14:37:55 GMT
FD1000 , "I like to think in simple terms. I'm quite sure VGSH will not produce 2.5% in the next year, unless rates will go down if rates are equal or higher, it will not make 2.5%." No one said it would. What has been said is that the total return is projected to be 2.5% on average per year over the time of the duration. That doesn't mean 2.5% this year, but about a combined 5% over 2 years or so. I am surprised as primarily a bond investor that you seem to not understand this "simple" concept. This is the rule of thumb that Yogi has discussed and has been discussed on M* ad nausium. There are research papers about it. And this is exactly the type of fund that it would be projected to work best. Buy it today. hold it for the duration. Reinvest all distributions. You can predict a 2.5% total return, regardless of orderly rate changes and nav swings. If you want to argue that, argue with R48, Yogi, Bogle, and all the research.
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Post by FD1000 on Jun 4, 2022 14:41:50 GMT
FD1000 , "I like to think in simple terms. I'm quite sure VGSH will not produce 2.5% in the next year, unless rates will go down if rates are equal or higher, it will not make 2.5%." No one said it would. What has been said is that the total return is projected to be 2.5% on average per year over the time of the duration. That doesn't mean 2.5% this year, but about a combined 5% over 2 years or so. I am surprised as primarily a bond investor that you seem to not understand this "simple" concept. This is the rule of thumb that Yogi has discussed and has been discussed on M* ad nausium. There are research papers about it. And this is exactly the type of fund that it would be projected to work best. Buy it today. hold it for the duration. Reinvest all distributions. You can predict a 2.5% total return, regardless of rate changes and nav swings. I understand, but many are looking for a fund with much higher dist NOW, others are waiting for rates stabilization and then selecting other funds with better performance. BTW, Vanguard Limited-Term Tax-Exempt Fund Admiral Shares (VMLUX) last dist were 0.013 * 12 = 0.156 for 12 months, NAV=10.66. Annually = 1.5%. Duration=2.4. 30 day sec=2.2% So, why not use this fund with much higher monthly dist + Fed tax-exempt(Munis)? VGSH lost ground in the last week while VMLUX rebound was much better and it made money last week. Munis correlation to rates is weaker, another advantage. Attachments:
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). It is of course NOT the current distribution yield, nor the TTM yield. 
