Long-term Treasuries - portfolio insurance?

[chang]

Is there any sense buying LT Treasuries at the present time? My thinking has been "no" because:

• The inverted yield curve means that yields are well below ST bonds. (And when the yield curve correct, LT prices could drop.)
• Rates are still going up, so prices should go down.
• They are highly volatile.

Conventional wisdom says that LT Treasuries are where investors flee when the s. hits the f. A kind of "black swan" insurance. But ZROZ is down 35% in the last year, which makes me wonder if it's "cheap" in any sense. Cheaper than it was a year ago, that's undeniable.

I still can't fathom buying 20-30 year Treasuries that yield less than 6-12 month T-bills.

Is anybody buying or holding LT Treasuries as a permanent part of their portfolio, in a "portfolio insurance" role?

[richardsok]

For the time being, my technical signals on TLT/TBF are dead even; a short term toss-up.

[Deleted]

No to LT Treasuries as insurance. Yes to gold.

[johnsmith]

Jan 31, 2023 17:22:20 GMT chang said:

Is there any sense buying LT Treasuries at the present time? My thinking has been "no" because:

• The inverted yield curve means that yields are well below ST bonds. (And when the yield curve correct, LT prices could drop.)
• Rates are still going up, so prices should go down.
• They are highly volatile.

Conventional wisdom says that LT Treasuries are where investors flee when the s. hits the f. A kind of "black swan" insurance. But ZROZ is down 35% in the last year, which makes me wonder if it's "cheap" in any sense. Cheaper than it was a year ago, that's undeniable.

I still can't fathom buying 20-30 year Treasuries that yield less than 6-12 month T-bills.

Is anybody buying or holding LT Treasuries as a permanent part of their portfolio, in a "portfolio insurance" role?

I think there is a place for LT or ZEROZ/EDV as a portfolio insurance.

The only issue is Inflation, if we don't get back to 0-interest rates, we may not see it be worth much.

Personally I still see a disinflationary/deflationary environment as more likely due to demographics, too much corporate/personal debt and china manufacturing creating lower prices for everything.

My scenario may not turn out to be true, the future is cloudy with a chance of meatballs!

[newtecher]

Long-term bonds are worth buying for the cap gains, not the yield. I am fairly confident that there will be a recession and low inflation (<2% in the second half of the year). If that is the case, long-term bonds will show significant gains as the long-term rates fall to 3% or lower. At that point, if all goes according to the plan, I will be selling LT treasuries and buying more stocks.

However, I do not think the long-term treasuries are worth buying and holding to maturity 10+ years from now as the risk of inflation over the long term is quite large. The long-term TIPS would be OK at 2+ real yields as a very long term holding.

[bb2]

I recently played with TLT & equivalent for short term cap gain, (month or two) and an education and was surprised how volatile is was. Only reason I tried it was that TLT dropped from 150 to 90 and couldn't resist. Made a few bucks but learned it wasn't my thing.

[FD1000]

Jan 31, 2023 21:02:54 GMT newtecher said:

Long-term bonds are worth buying for the cap gains, not the yield. I am fairly confident that there will be a recession and low inflation (<2% in the second half of the year). If that is the case, long-term bonds will show significant gains as the long-term rates fall to 3% or lower. At that point, if all goes according to the plan, I will be selling LT treasuries and buying more stocks.

However, I do not think the long-term treasuries are worth buying and holding to maturity 10+ years from now as the risk of inflation over the long term is quite large. The long-term TIPS would be OK at 2+ real yields as a very long term holding.

Bingo.  Wait for rates to stabilize, then buy TLT for a good performance in just several months. T/A should be a major decision when to buy.
On the other hand, I will use LT HY munis, because it's a "safer" bet to make money + lower volatility + let you get out in time.

This is what I also said in early 11/2022, don't buy treasuries, not even inter duration, such as VGIT, and use HY Muni instead. The chart below is the proof.

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[retiredat48]

Feb 27, 2023 21:05:53 GMT FD1000 said:

Jan 31, 2023 21:02:54 GMT newtecher said:

Long-term bonds are worth buying for the cap gains, not the yield. I am fairly confident that there will be a recession and low inflation (<2% in the second half of the year). If that is the case, long-term bonds will show significant gains as the long-term rates fall to 3% or lower. At that point, if all goes according to the plan, I will be selling LT treasuries and buying more stocks.

However, I do not think the long-term treasuries are worth buying and holding to maturity 10+ years from now as the risk of inflation over the long term is quite large. The long-term TIPS would be OK at 2+ real yields as a very long term holding.

Bingo.  Wait for rates to stabilize, then buy TLT for a good performance in just several months. T/A should be a major decision when to buy.
On the other hand, I will use LT HY munis, because it's a "safer" bet to make money + lower volatility + let you get out in time.

This is what I also said in early 11/2022, don't buy treasuries, not even inter duration, such as VGIT, and use HY Muni instead. The chart below is the proof.

So FD1000...when should one start the chart at zero percent?  You "cherry pick."

How about start on 1 Feb.  Then Muny bonds DOWN 7.75% since;  VGIT only down 3.25%.

And what will the investor in Muny bonds do the day Sacramento CA and Yonkers NY (for example) announce they are suspending all muny bond payments, as they are each bankrupt.  Huge immediate loss in all muny bonds occurs.  Not so, for Treasuries.


R48

[FD1000]

Feb 27, 2023 21:36:08 GMT retiredat48 said:

Feb 27, 2023 21:05:53 GMT FD1000 said:

Bingo.  Wait for rates to stabilize, then buy TLT for a good performance in just several months. T/A should be a major decision when to buy.
On the other hand, I will use LT HY munis, because it's a "safer" bet to make money + lower volatility + let you get out in time.

This is what I also said in early 11/2022, don't buy treasuries, not even inter duration, such as VGIT, and use HY Muni instead. The chart below is the proof.

So FD1000...when should one start the chart at zero percent?  You "cherry pick."

How about start on 1 Feb.  Then Muny bonds DOWN 7.75% since;  VGIT only down 3.25%.

And what will the investor in Muny bonds do the day Sacramento CA and Yonkers NY (for example) announce they are suspending all muny bond payments, as they are each bankrupt.  Huge immediate loss in all muny bonds occurs.  Not so, for Treasuries.


R48

Easy answer:

1) I started in 11/2020 because that is when I started my post (big-bang-investors.proboards.com/thread/1959/bond-future-musings).  In that thread you mentioned VGIT and I said, that is not the time to own treasuries, that's the time to buy better categories, such as HY Munis. So, since 11/1/2022 to today...VGIT made 1.6% while ORNAX made 8%, and TLT made just 6.4% with huge volatility
On 12/31/2022, I started a thread for 2023 and said again" Bonds: YTD: 2022 was a terrible year. In most cases, we should have a good 2023. You can make several % more in managed bond fund, this is where they shine. Think DODIX for higher rated bonds, HY Munis and good Multi" 
2) I already sold 99+% of my portfolio, all in 2 HY Munis, in early Feb.
3) You also said that Munis lost more in 02/2023. It's great, in the next uptrend, Munis will rebound stronger, count me in. 
4) Remember, my goal is to make more money in bonds. I don't own bonds for safety. 
5) I also mentioned one of my favorite T/A indicators. The 3 line break. BTW, my last exit was earlier than the 3-line-break.
6) SNAXX MM pays me now 4.62%, a nice guarantee, the bird-in-the hand, no risk/volatility to have.
7) You also said "start on 1 Feb. Then Muny bonds DOWN 7.75% since; VGIT only down 3.25%." I think you looked at TLT instead of ORNAX.  Since Feb 1...TLT lost -6.4%...VGIT -3.6...ORNAX -4%.  See chart below

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[retiredat48]

I declare victory. Let the party begin; FD1000 also invited!

Victory as in my expectations that my ownership of VGSH (2 yr treasury bond fund) and VGIT (5 yr bond treasury fund) was to earn BOTH a capital gain, and earned interest. Today I have a capital gain and earning interest, in VGSG. Today, I have a relatively large capital gain in VGIT, and earning interest as we go. Beats FD's holding 100% in money market funds. My brother very happy he followed this guidance and bot VGIT!

BTW I also strongly encouraged that the game-winner goal is to lock in longer term treasuries if yields get to 4% or above...and that yields would not last long at that rate.  Today, no treasury above 4%.  I doubt we will see LT Treasuries get above 4% for a very long time.

R48 (conservative investor; not a trader)

[FD1000]

Mar 15, 2023 16:11:12 GMT retiredat48 said:

I declare victory. Let the party begin; FD1000 also invited!

Victory as in my expectations that my ownership of VGSH (2 yr treasury bond fund) and VGIT (5 yr bond treasury fund) was to earn BOTH a capital gain, and earned interest. Today I have a capital gain and earning interest, in VGSG. Today, I have a relatively large capital gain in VGIT, and earning interest as we go. Beats FD's holding 100% in money market funds. My brother very happy he followed this guidance and bot VGIT!

R48 (conservative investor; not a trader)

 Please don't start again.  How many times do we have to go thru the above?
1) Safe MM/CD/treasury VS a maybe in VGSH? VGSH is still down since you started your thread in 03/2022. How can compare something that goes up all the time VS VGSH with 3.5% volatility?
I never hold 100% MM if I see a good trade. See ORNAX below and see clear trades since 11/2022.
2) In 11/08/2022 I started my thread why you want to invest in bonds after months in MM (and making 2 HY Munies trades for several days). I also said I will trade HY Munis, others who want to hold can use DODIX instead of VGIT.  BTW, most experts+401K+target funds use US total bond index and not treasuries as their default for a good reason.
The chart below are pretty clear who has been winning. But winning isn't everything, VGSH had a huge volatility that most retirees (or others) want to see with their SAFE money.
3) If you are not a trader, why do trade so often, which is actually part of your system? (example: PYRUP).

The most important for most investors is risk-adjusted performance.

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[habsui]

No graphs necessary (I ran out of blue ink for my TLT). Everybody who recently went into longer dated treasuries is up significantly. Question is whether the reasons are good for the longer term outlook or how long it will last.

[retiredat48]

Mar 15, 2023 19:02:30 GMT habsui said:

No graphs necessary (I ran out of blue ink for my TLT). Everybody who recently went into longer dated treasuries is up significantly. Question is whether the reasons are good for the longer term outlook or how long it will last.

R48 reply: No graphs necessary (I ran out of blue ink for my TLT). Everybody who recently went into longer dated treasuries is up significantly. Question is whether the reasons are good for the longer term outlook or how long it will last.

Did I hear an echo

...R48

[rhythmmethod]

"Please don't start again. How many times do we have to go thru the above?"

Pot - Kettle. 

[Capital]

Mar 15, 2023 19:35:17 GMT rhythmmethod said:

"Please don't start again. How many times do we have to go thru the above?"

Pot - Kettle. 

rhythmmethod, this too shall pass. 

[FD1000]

If you timed TLT well, congrats!!
This thread is about LT treasuries, not ST-mid term + is it a good insurance?

The key of course, is it for 6-12-18-24 months?
Do you trade it? maybe buy TLT above 4% rate and sell below 3%?
It's always about what/how/when/conditions/what % of your portfolio?

My buy signaled flashed on May 2-3 for TLT and for many other bond funds around May 6-7.

[habsui]

If one got TLT with a close to a 4% yield, then it should be good longer term as of now.

[rhythmmethod]

Mar 15, 2023 19:38:57 GMT Capital said:

Mar 15, 2023 19:35:17 GMT rhythmmethod said:

"Please don't start again. How many times do we have to go thru the above?"

Pot - Kettle. 

rhythmmethod , this too shall pass. 

Capital, HAHA - Like too much gas - I don't mean energy - Take care, 

[rhythmmethod]

Jan 31, 2023 17:22:20 GMT chang said:

Is there any sense buying LT Treasuries at the present time? My thinking has been "no" because:

• The inverted yield curve means that yields are well below ST bonds. (And when the yield curve correct, LT prices could drop.)
• Rates are still going up, so prices should go down.
• They are highly volatile.

Conventional wisdom says that LT Treasuries are where investors flee when the s. hits the f. A kind of "black swan" insurance. But ZROZ is down 35% in the last year, which makes me wonder if it's "cheap" in any sense. Cheaper than it was a year ago, that's undeniable.

I still can't fathom buying 20-30 year Treasuries that yield less than 6-12 month T-bills.

Is anybody buying or holding LT Treasuries as a permanent part of their portfolio, in a "portfolio insurance" role?

chang , As ever, I have no idea. But I was buying EDV in the low 80's because S### happens. Also, I should admit I was buying higher and am still down a bit. However, it has been a nice counter-weight the past few days. So yes, I hold some as "portfolio insurance". Of course I'm not qualified to recommend, it's just what I do - buy cheap stuff. Well, except for shoes, drums, wine and cannibus.