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Post by mozart522 on Jul 11, 2022 22:11:24 GMT
6 month Treasury Bills are now at about 2.5% likely going up to 2.8-3% after the next hike. This is far higher than MM at 1.4 or so going up to maybe 2% sometime after the hike. I will wait until the next hike later this month, and then likely buy. I will keep my eqquity allocation funds in MM.
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Post by retiredat48 on Jul 12, 2022 2:42:25 GMT
--I consider the two year treasury to be the sweet spot currently...I think you saw my posts.
--I have had good (best) buying times as one day before the hike...seems you get the max yield. I would not be surprised to see the 6 month yield FALL on the day the fed announces even a 75 bp hike (ie you could have an instant price appreciation).
R48
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Post by mozart522 on Jul 12, 2022 12:18:04 GMT
retiredat48, My logic is simple. I know I will get 1.25% in 6 months. If I buy another each month, come January I will be likely getting average 3%+ annualized each month. This does not come with the risk of a 2 year bond fund. Quite comforting if in recession next year. Once in recession, I would switch to bond funds once the FED begins to lower rates again. At that point, intermediate or longer would seem to likely give the most gain.
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Post by Chahta on Jul 12, 2022 12:29:18 GMT
I have tried to understand the 2 year bond fund thing. 3 month return (about the time the discussion started) it's down. YTD it is down. I don't get how there is money to be made short term for cash. I do understand the short-term Treasury ladder thing for cash, which I am doing.
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Post by Deleted on Jul 12, 2022 13:14:15 GMT
I have tried to understand the 2 year bond fund thing. 3 month return (about the time the discussion started) it's down. YTD it is down. I don't get how there is money to be made short term for cash. I do understand the short-term Treasury ladder thing for cash, which I am doing. I prefer a ladder, but the 2 yr bond fund under discussion is an ETF., which may have been bought at a decent discount at an opportune time, so the investor can be ahead of the fund's TR YTD. |
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Post by mozart522 on Jul 12, 2022 15:08:18 GMT
I have tried to understand the 2 year bond fund thing. 3 month return (about the time the discussion started) it's down. YTD it is down. I don't get how there is money to be made short term for cash. I do understand the short-term Treasury ladder thing for cash, which I am doing. I prefer a ladder, but the 2 yr bond fund under discussion is an ETF., which may have been bought at a decent discount at an opportune time, so the investor can be ahead of the fund's TR YTD. Even if the buyer bought at the dead bottom $58.29, there would be at most a $.50 gain or about .75% today. Much of that could well be lost at the next rate hike at the end of this month. I bought mine at 58.98 and dumped it at 58.80, a loss but a very small one on a very small amount. VGSH is down YTD 3%. The FED has hiked rates 1.5%. The fund has a 2 year duration indicating a 3% drop with a 1.5% interest rate hike. So the first 6 hikes are baked in. But not the next .75% hike in July or the one in Sept., or those after. Many predict a 3% FED target which would indicate a 6% NAV drop in VGSH Hold it long enough and wait for the FED to ease and you will be made whole and even have a gain of some size. But at that point there will be far better opportunities in both the bond and stock market for ones cash proxy, IMHO. |
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Post by Deleted on Jul 12, 2022 16:17:06 GMT
Even if the buyer bought at the dead bottom $58.29, there would be at most a $.50 gain or about .75% today. Much of that could well be lost at the next rate hike at the end of this month. I bought mine at 58.98 and dumped it at 58.80, a loss but a very small one on a very small amount. VGSH is down YTD 3%. The FED has hiked rates 1.5%. The fund has a 2 year duration indicating a 3% drop with a 1.5% interest rate hike. So the first 6 hikes are baked in. But not the next .75% hike in July or the one in Sept., or those after. Many predict a 3% FED target which would indicate a 6% NAV drop in VGSH Hold it long enough and wait for the FED to ease and you will be made whole and even have a gain of some size. But at that point there will be far better opportunities in both the bond and stock market for ones cash proxy, IMHO. When the original post asking whether VGSH would be suitable for some cash, I cautioned against it and recommended money markets. However, as far as I can tell all bonds funds are down YTD, likely equity funds are too. Commodities were hot for awhile, not sure about their YTD performance. |
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Post by mozart522 on Jul 12, 2022 16:35:27 GMT
Even if the buyer bought at the dead bottom $58.29, there would be at most a $.50 gain or about .75% today. Much of that could well be lost at the next rate hike at the end of this month. I bought mine at 58.98 and dumped it at 58.80, a loss but a very small one on a very small amount. VGSH is down YTD 3%. The FED has hiked rates 1.5%. The fund has a 2 year duration indicating a 3% drop with a 1.5% interest rate hike. So the first 6 hikes are baked in. But not the next .75% hike in July or the one in Sept., or those after. Many predict a 3% FED target which would indicate a 6% NAV drop in VGSH Hold it long enough and wait for the FED to ease and you will be made whole and even have a gain of some size. But at that point there will be far better opportunities in both the bond and stock market for ones cash proxy, IMHO. When the original post asking whether VGSH would be suitable for some cash, I cautioned against it and recommended money markets. However, as far as I can tell all bonds funds are down YTD, likely equity funds are too. Commodities were hot for awhile, not sure about their YTD performance. Yes, but not all bonds if held to maturity. ST T-bills will pay more than MM and are just as safe. Currently, the 6 month T-bill pays about 40% more than MM. If one needs that cash within 6 months, then a MM might be a better choice. |
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Post by retiredat48 on Jul 12, 2022 16:44:47 GMT
Some points to answer/address comments above...
--Of course, VSGH is down for the year. It corrected in Jan-March to reflect the FULL ANTICIPATED FED RATE INCREASES. That's when it became investable...and the thread started.
--I have had a net positive gain in my purchase of VGSH to date.
--Haven posted that even with a favorable purchase, one is ahead only 0.75% to date. That is a great gain. Annualized, it is terrific.
--It is often stated that when the fed makes the next rate hike...you may buy, as the 2 yr rate will be higher by like amount. simply not so. The next fed rate hike is already in the yields. Again, Gundlach curves show the 2 yr and the fed funds rate, track very closely. It will merge in the future. The next fed rate hike still does not get to 3%!
--Even if the fed gets to 3.25% to 3.5% this year, the 2 yr will fluctuate around that point. All the discussion will be about the upcoming or current recession and will the feds reverse course. At the point the two year yield will fluctuate, at times getting lower, then I may sell. Then rinse and repeat if rate goes back up. Note all treasuries of all duration, are showing strong resistance to going above 3% yield'
--Lastly,,,yields from here just do not matter much. Yields up, you gain more in dividend income paid; yields fall, you gain in capital appreciation. Remember that old rule of thumb thing...you get the starting yield, if held to near maturity. And the fund managers know this. They don't have to sell any bond at a loss, if for instance, it matures in 6 months. Then they rollover to higher yielding bonds if rates have gone way up.
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Thus I fully expect to sell at a goodly gain, within 4 months to 9 months. And be ahead of money market return rates.
We will see. I could be wrong...but I do not expect to "lose money." this is what makes a market.
And, for you aggressive investors, it is what I have done for over four decades with my cash that pomes from lets say selling a mutual fund. I put it in longer dated maturities bond funds, and let the NAV price fluctuate. I get the higher yield, with a potential impact from principal loss (or gain). On balance, this has worked well for me, netting the higher yield and the principal actually increasing most of the time. That is because typically, when the stock market falls, rates go down...bond prices INCREASE. I curtailed this practice when feds kept rates at zero, and bond yields too low. Now restarted...but going past two years still to risky.
R48
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Post by mozart522 on Jul 12, 2022 17:06:12 GMT
retiredat48," "--Of course, VSGH is down for the year. It corrected in Jan-March to reflect the FULL ANTICIPATED FED RATE INCREASES. That's when it became investable...and the thread started." Your math seems fuzzy to me. FED has raised 1.5% VGSH is down 3%. With a 2 year duration, that is exactly where it should be. Now the FED raises another 1.5% over the next 5 months. VGSH NAV will have to drop another amount as the yield rises as you say "by a like amount". And yes .7 would be a nice if short-lived gain, but you don't have that since you said you have made several buys all but one of which had to be above the lowest price ths year. As for a "goodly gain" in 4 to 6 months, perhaps, perhaps not. I can't see it unless the FED eases in that time period by a lot. JMHO
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Post by fishingrod on Jul 12, 2022 17:58:26 GMT
mozart522 , retiredat48 , Chahta ,@haven , I did the math on VGSH and with all interest reinvested the returns from the dates mentioned are varied. It is obvious that retiredat48 , did some averaging down, lowering cost basis, which is fine with me. April 13th low price $59.23 buy gives a total return of negative (.83%) May 4th low price $58.78 buy gives a total return of negative (.44%) June 14th low price $58.26 buy gives a total return of positive .68% This of course does not take into acct. how much was invested on each date. If equal amounts were invested then one would be down (.59%), not including today.
R48 said,
"And, for you aggressive investors, it is what I have done for over four decades with my cash that pomes from lets say selling a mutual fund. I put it in longer dated maturities bond funds, and let the NAV price fluctuate."
This practice of investing cash in longer dated bond funds or any bond funds certainly worked very well during a 40 year bond bull market. Not so well after that. As R48 has mentioned.
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Post by FD1000 on Jul 12, 2022 19:39:48 GMT
Can't get better when mozart is making my case. When you have a guarantee of good return (double than MM) without risk/SD, why take a maybe(VGSH)? And VGSH comes with extreme volatility, per a very low potential over performance.
You also don't pay state tax on treasuries.
BTW, the minute treasury pay 2.5-3% for 6-12 months (happened already a month ago), the game is over. The risk/reward for VGSH isn't worth it.
This is how I look at my portfolio. Every week, I ask myself, suppose I have 100% cash, where would I invest right now and what are the best 2-3 ideas? That's exactly what I do next, the past is dead.
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Post by mozart522 on Jul 12, 2022 21:31:11 GMT
Can't get better when mozart is making my case. When you have a guarantee of good return (double than MM) without risk/SD, why take a maybe(VGSH)? And VGSH comes with extreme volatility, per a very low potential over performance. You also don't pay state tax on treasuries. BTW, the minute treasury pay 2.5-3% for 6-12 months ( happened already a month ago), the game is over. The risk/reward for VGSH isn't worth it. This is how I look at my portfolio. Every week, I ask myself, suppose I have 100% cash, where would I invest right now and what are the best 2-3 ideas? That's exactly what I do next, the past is dead. When you are right, you are right, FD  |
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Post by retiredat48 on Jul 12, 2022 21:58:07 GMT
retiredat48 ," "--Of course, VSGH is down for the year. It corrected in Jan-March to reflect the FULL ANTICIPATED FED RATE INCREASES. That's when it became investable...and the thread started." Your math seems fuzzy to me. FED has raised 1.5% VGSH is down 3%. With a 2 year duration, that is exactly where it should be. Now the FED raises another 1.5% over the next 5 months. VGSH NAV will have to drop another amount as the yield rises as you say "by a like amount". And yes .7 would be a nice if short-lived gain, but you don't have that since you said you have made several buys all but one of which had to be above the lowest price ths year. As for a "goodly gain" in 4 to 6 months, perhaps, perhaps not. I can't see it unless the FED eases in that time period by a lot. JMHO ,...I think your history is wrong. VGSH and two year treasury yields fell BEFORE last fed 75 bp rate hike. In fact, from January to April was the big fall. The market finally woke up, and realized the fed had earlier published it planned to take the fed rate to about 3% within a year. Bonds reacted casually for awhile; then finally it was realized, wow, you could lose a lot holding them, so it sold off in Q1. However, this Q1 selloff took 2 yr yields to the max likely by the fed final rate. The rate drop was not because of the duration formula; it was an ANTICIPATION rate change...fully going to where the fed may go by November 2022. We'll see at the next fed rate hike...assume 75 bp's. I doubt the 2 yr will move at all, and certainly not the 75 to 150 bp you are postulating. BTW Just for info (you may not like him or not), but Jim Cramer just reported he went out and bought 3 year treasury bonds...his sweet spot. He makes same case as I am. My next move may be to go three years out also. I'm comfortable at two years, currently. R48 |
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Post by retiredat48 on Jul 12, 2022 22:08:37 GMT
R48 said,
"And, for you aggressive investors, it is what I have done for over four decades with my cash that pomes from lets say selling a mutual fund. I put it in longer dated maturities bond funds, and let the NAV price fluctuate."
fishingrod: This practice of investing cash in longer dated bond funds or any bond funds certainly worked very well during a 40 year bond bull market. Not so well after that. As R48 has mentioned.
YOu are right, fishingrod. But remember during that 40 year period bonds did not go straight up in price. Huge fluctuations all the time. Feds control short rates, but it influences the long rates. So while the next decade trend in bonds may be higher yields, it will still be investible, as yields will do their sin wave fluctuations like always. There are even some forecasters predicting a base case of deflation after a few years from now!...with bond yields falling dramatically. (Think of a million truck drivers replaced by autopilot trucks; restaurant workers replaced by robots...and so on). R48 |
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Post by Deleted on Jul 13, 2022 0:22:01 GMT
"YOu are right, fishingrod. But remember during that 40 year period bonds did not go straight up in price. Huge fluctuations all the time. Feds control short rates, but it influences the long rates. So while the next decade trend in bonds may be higher yields, it will still be investible, as yields will do their sin wave fluctuations like always. There are even some forecasters predicting a base case of deflation after a few years from now!...with bond yields falling dramatically. (Think of a million truck drivers replaced by autopilot trucks; restaurant workers replaced by robots...and so on)." R48 "Sine wave" not sin wave fluctuations, right? |
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Post by mozart522 on Jul 13, 2022 2:05:49 GMT
retiredat48 ," "--Of course, VSGH is down for the year. It corrected in Jan-March to reflect the FULL ANTICIPATED FED RATE INCREASES. That's when it became investable...and the thread started." Your math seems fuzzy to me. FED has raised 1.5% VGSH is down 3%. With a 2 year duration, that is exactly where it should be. Now the FED raises another 1.5% over the next 5 months. VGSH NAV will have to drop another amount as the yield rises as you say "by a like amount". And yes .7 would be a nice if short-lived gain, but you don't have that since you said you have made several buys all but one of which had to be above the lowest price ths year. As for a "goodly gain" in 4 to 6 months, perhaps, perhaps not. I can't see it unless the FED eases in that time period by a lot. JMHO ,...I think your history is wrong. VGSH and two year treasury yields fell BEFORE last fed 75 bp rate hike. In fact, from January to April was the big fall. The market finally woke up, and realized the fed had earlier published it planned to take the fed rate to about 3% within a year. Bonds reacted casually for awhile; then finally it was realized, wow, you could lose a lot holding them, so it sold off in Q1. However, this Q1 selloff took 2 yr yields to the max likely by the fed final rate. The rate drop was not because of the duration formula; it was an ANTICIPATION rate change...fully going to where the fed may go by November 2022. We'll see at the next fed rate hike...assume 75 bp's. I doubt the 2 yr will move at all, and certainly not the 75 to 150 bp you are postulating. BTW Just for info (you may not like him or not), but Jim Cramer just reported he went out and bought 3 year treasury bonds...his sweet spot. He makes same case as I am. My next move may be to go three years out also. I'm comfortable at two years, currently. R48 I didn't post any history. I posted that the FED raised 150 bps and VGSH is down 300bps, just about where it should be with a 2 year duration. Bonds 101. The FED has indicated that it will likely raise another 150bps. If you are contending that this will not cause the NAV of VGSH to fall further, we will indeed have to wait and see. Fortunately, we will have our answer in less than a month, but it will probably take a little longer for the entire FED rate hike to be incorporated to the NAV. We can revisit next month. Cramer is buying treasury BONDS, not bond funds. The difference has been pointed out to you several times. One is risk free if held to maturity. Yours is never risk free and the outcome is not known over the next 2 years. The "Rule" might work or might not. |
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Post by retiredat48 on Jul 13, 2022 4:39:23 GMT
mozart522 ,...I think your history is wrong. VGSH and two year treasury yields fell BEFORE last fed 75 bp rate hike. In fact, from January to April was the big fall. The market finally woke up, and realized the fed had earlier published it planned to take the fed rate to about 3% within a year. Bonds reacted casually for awhile; then finally it was realized, wow, you could lose a lot holding them, so it sold off in Q1. However, this Q1 selloff took 2 yr yields to the max likely by the fed final rate. The rate drop was not because of the duration formula; it was an ANTICIPATION rate change...fully going to where the fed may go by November 2022. We'll see at the next fed rate hike...assume 75 bp's. I doubt the 2 yr will move at all, and certainly not the 75 to 150 bp you are postulating. BTW Just for info (you may not like him or not), but Jim Cramer just reported he went out and bought 3 year treasury bonds...his sweet spot. He makes same case as I am. My next move may be to go three years out also. I'm comfortable at two years, currently. R48 I didn't post any history. I posted that the FED raised 150 bps and VGSH is down 300bps, just about where it should be with a 2 year duration. Bonds 101. The FED has indicated that it will likely raise another 150bps. If you are contending that this will not cause the NAV of VGSH to fall further, we will indeed have to wait and see. Fortunately, we will have our answer in less than a month, but it will probably take a little longer for the entire FED rate hike to be incorporated to the NAV. We can revisit next month. Cramer is buying treasury BONDS, not bond funds. The difference has been pointed out to you several times. One is risk free if held to maturity. Yours is never risk free and the outcome is not known over the next 2 years. The "Rule" might work or might not. Just like when you buy a two year bond, and hold to maturity, you don,t lose. Similarly, hold a two yr treasury bond fund to maturity, the rule works. But I don’t intend to hold two years. Here’s the deal. Google two year treasury yield versus fed funds rate. You will see these yields correlate historically very, very closely (Gundlach point). Today the values given are 1.58% fed funds rate; 3.06% two year t rate. This is a huge difference. With a next fed move of 75 bp, that takes the fed to only 2.33% rate. Add in a sept increase of 25 to 50 BP and you are still below the two yr treasury yield. That,s why I see little movement in two year. As you say, we shall see. And with any hint of recession, expect the two year to fall below 3%; that’s where I liquidate…probably day before Election Day. R48 |
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Post by mozart522 on Jul 13, 2022 11:55:19 GMT
retiredat48, So I googled it: en.macromicro.me/collections/51/us-treasury-bond/762/us-fed-funds-rate-treasury-bonds-rateSometimes, particularly at very low rates, they do correlate closely, but not perfectly. Other times the 2 year is quite a bit higher or quite a bit lower and sometimes they cross each other. Look at the 5 year chart. You will see that when rates are rising they widen far apart and when rates are falling they come closer together. Seem like what one would expect. So now rates are rising and they are far apart. Do you plan to hold until they drop and make your money from NAV recovery?
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Post by FD1000 on Jul 13, 2022 12:29:42 GMT
There is no need to wait and see. The idea is to get a much better GUARANTEED returns than MM. Making double than MM is a great deal. All you got to do is select the length you want to hold, 6-9-12 months.
So, let's assume R48 made more by perfect timing + trading. But, that's not what we are discussing here. If you want to discuss trading, I'm all ears, that's what I do for years using bond OEFs, and VGSH isn't the one I ever traded.
R48, you just don't want to admit it, pretty funny.
BTW, I never owned treasuries but suppose I bought 1 year treasuries that pay 3%, after 6 months they pay only 2.5%. What happens if I sell it? Do I get half of the yield + something on the difference (3% to 2.5%)?
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Post by mozart522 on Jul 13, 2022 12:56:20 GMT
LOL Now the FED will likely raise 100bps in July and 75bps or more in September. Can't wait to see what the 6th month T-bill is in August.
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Post by Chahta on Jul 13, 2022 12:59:44 GMT
I have tried to understand the 2 year bond fund thing. 3 month return (about the time the discussion started) it's down. YTD it is down. I don't get how there is money to be made short term for cash. I do understand the short-term Treasury ladder thing for cash, which I am doing. I prefer a ladder, but the 2 yr bond fund under discussion is an ETF., which may have been bought at a decent discount at an opportune time, so the investor can be ahead of the fund's TR YTD. I understand that, but one didn’t buy it well below $59 three months ago. It only varies a few cents intraday. |
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Post by Chahta on Jul 13, 2022 13:01:18 GMT
LOL Now the FED will likely raise 100bps in July and 75bps or more in September. Can't wait to see what the 6th month T-bill is in August. Well I have a 3-month coming due then so I should be happy. 😁 |
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Post by FD1000 on Jul 13, 2022 16:23:27 GMT
2 year treasury rate went up, but the 10 is down.
At Fidelity, I see 6 months treasury pay now a GUARANTEE 2.76% and one year 3.09%
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Post by Deleted on Jul 13, 2022 16:58:32 GMT
LOL Now the FED will likely raise 100bps in July and 75bps or more in September. Can't wait to see what the 6th month T-bill is in August. They might not if they determine the CPI is backward looking. |
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Post by mozart522 on Jul 13, 2022 17:24:10 GMT
LOL Now the FED will likely raise 100bps in July and 75bps or more in September. Can't wait to see what the 6th month T-bill is in August. They might not if they determine the CPI is backward looking. Isn't it always backward looking? Haven't they indicated they will need at least 2 months coming down before they will even think about backing down to .25? 100bp is just a guess and what I hope they do. .75 is a given and high confidence that another .75 in Sept. Even if you/they believe it has peaked, 9+% will need to be brought down. |
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Post by Deleted on Jul 13, 2022 19:06:53 GMT
Yes, high inflation is the fault of BLS.
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Post by Deleted on Jul 13, 2022 19:39:40 GMT
They might not if they determine the CPI is backward looking. Isn't it always backward looking? Haven't they indicated they will need at least 2 months coming down before they will even think about backing down to .25? 100bp is just a guess and what I hope they do. .75 is a given and high confidence that another .75 in Sept. Even if you/they believe it has peaked, 9+% will need to be brought down. Yes it is - always backwards looking. Whether it is recognized as such - not necessarily. I don't care what they indicate as they have shown they can change course. They have certainly indicated they aren't very good at analysis, interpretation and timing. The inflation that is in the system can't be changed. If we knew it is presently getting hotter, then a greater raise might be helpful to effect future effects. A bigger raise when inflation is already slowing down, not so much. In fact it could slow down the economy more than is needed without any benefit. |
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Post by FD1000 on Jul 13, 2022 19:46:42 GMT
Why are we discussing inflation in this thread?
This thread is about investing in treasuries.
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Post by Deleted on Jul 13, 2022 20:06:39 GMT
Why are we discussing inflation in this thread? This thread is about investing in treasuries. It might be hard to tell, but we are discussing the projected increase in bps, which of course can impact decisions to purchase treasuries. Hope that helps. |
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