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Post by Chahta on Sept 28, 2023 13:53:46 GMT
New 52 week low and selling about where it did 15 years ago. Someday there will be a killing made in LT bonds for the brave and break the bank paying such high interest, I hope.
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Post by yogibearbull on Sept 28, 2023 14:18:18 GMT
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Post by mnfish on Sept 28, 2023 17:31:09 GMT
I had a limit order for TLT @ $90 for a few weeks a while back and cancelled it. If rates truly are going to be "higher for longer" how long does one wait to make a killing?
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Post by FD1000 on Sept 28, 2023 18:14:02 GMT
As good as it sounds, I never owned a direct treasury fund because treasuries have the highest correlation to rates, and rates are difficult to predict. Add to it high volatility and I stay away from this category. High volatility doesn't work well with trends. On the other hand long term high yield munis have lower volatility, trends are easier to see, less influenced by rates and easier to make money. See below 3 attachments. 1, 3 years + since 1-1-2018 so you can see performance + volatility.
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Post by habsui on Sept 29, 2023 2:00:02 GMT
If the 10yr goes to 5%, I'll start buying..
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Post by Chahta on Sept 29, 2023 2:10:50 GMT
I had a limit order for TLT @ $90 for a few weeks a while back and cancelled it. If rates truly are going to be "higher for longer" how long does one wait to make a killing? The thought process is that buying 10-year Treasuries soon affords the 4.5% yield for a long time. CGs follow once 4.5% is no longer available and people scramble to buy as rates decline. Who knows when rates top out? The spread is so narrow the change could be fairly fast.
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Post by Capital on Sept 29, 2023 9:18:49 GMT
My thinking about interest rates, based upon what I hear from the FED, is that higher rates are going to be with us for some time. As yogibearbull posted earlier long-term rates appear to be pivoting around short-term rates. My thinking is that short-term rates are closer to top than long-term and will stay in this range for some time. Long-term rates being lower than short-term rates still have a climb ahead. It goes back to the same argument I have for higher inflation, it you spend a long time below the average you need to expect to spend some time above the average to even things back out. I think there is still a reason to hold equities; however, I think it will be a much nicer world for savers going forward than it has been in the near past. One thing to remember, in the months pre-Covid interest rates had started to go up. They abruptly reversed when the FED caused them to go down. I'm staying short in my maturities for now. That is what the market is telling me to do.
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Post by mnfish on Sept 29, 2023 11:45:49 GMT
In 2003 TLT paid $4.57 in interest and was priced around $85, so a 5.37% yield. At a current monthly payment of $.29 the price would have to be $65 to equal that. I'll sit tight until it gets to around $70 and take another look.
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Post by Chahta on Sept 29, 2023 12:13:23 GMT
Buying TLT is a long term play based on yield that hopefully will not be available long term. If inflation isn’t tamed and somehow gets worse, oh well…..
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Post by FD1000 on Sept 29, 2023 14:18:42 GMT
Observations: 1) Someone buys TLT for protection + to make money. It's yield for a LT bond is pretty low compares to other categories. 2) Buying TLT for LT now? not bad, but many experts told us, it was a great time to buy treasuries when the 10 YR reached 4%...and then it went to 4.5%. What happened since it was over 4% in June 7th? VGIT was down 2.5%, TLT down 12%, ( schrts.co/TZtDdIYG).
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Post by Norbert on Sept 29, 2023 14:51:24 GMT
Possible ramifications of falling T-Bond value decline? Scare story or reality?
Snippet:
An adverse shock to the value of government paper used as collateral could trigger destabilising dynamics,” it said. It can trigger margin calls on derivatives contracts, and demands for a collateral top-up. This in turn can trigger fire sales, setting in motion a “liquidity-credit risk spiral”.
Opinions vary on why US yields have gone mad. We know that foreign buyers are shunning US debt, though not the dollar itself. China and Japan have between them liquidated $450bn of US Treasuries over the last year.
The Global South holds three-quarters of global foreign exchange reserves. They are alarmed by Washington’s weaponisation of the world’s dollarised financial system and are becoming reluctant buyers.
World markets are collectively choking at the scale of the Trump-Biden deficits, currently heading towards 8pc of GDP at the top of the cycle. They have had enough of a dysfunctional Congress that refuses to rein in middle class entitlements, on track to push the debt ratio to 180pc of GDP by the early 2050s.
They know that the US has to roll over $7.6 trillion of debt next year, as well as funding an avalanche of new debt issuance, and they are taking precautions.
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Post by anitya on Sept 29, 2023 15:09:37 GMT
Capital, I am trying to grapple with mean reversion as a credible investing theory, especially when it is not proposed in conjunction with Time. Please share what you know. A
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Post by Capital on Sept 29, 2023 15:54:25 GMT
Capital , I am trying to grapple with mean reversion as a credible investing theory, especially when it is not proposed in conjunction with Time. Please share what you know. A anitya , I look at the 10-year treasury as my base. Most rates, including mortgage rates, are tied to that rate. The long-term average of the 10-year treasury rate is 5.88% -- see the notation in the "Basic Information" on the right side of this LINKNow I will refer you to this GRAPH. If you move your curser over the graph you can see that we have been below that average since 2001 == just over 20 years. Interest rates move on an 80-year cycle as do most things human. The last peak in 1981 occurred about 40 years before the trough occurring in 2020. That was the first half of the 80-cycle we are currently in. I would expect that for the next 40 years rates will continue to rise until they peak once again.
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Post by uncleharley on Sept 29, 2023 16:17:59 GMT
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Post by habsui on Sept 29, 2023 21:53:52 GMT
IMO, one should buy TLT only as a CG trade. Otherwise, buy the 10yr directly..
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Post by Capital on Oct 1, 2023 15:05:41 GMT
My thinking about interest rates, based upon what I hear from the FED, is that higher rates are going to be with us for some time. As yogibearbull posted earlier long-term rates appear to be pivoting around short-term rates. My thinking is that short-term rates are closer to top than long-term and will stay in this range for some time. Long-term rates being lower than short-term rates still have a climb ahead. It goes back to the same argument I have for higher inflation, it you spend a long time below the average you need to expect to spend some time above the average to even things back out. I think there is still a reason to hold equities; however, I think it will be a much nicer world for savers going forward than it has been in the near past. One thing to remember, in the months pre-Covid interest rates had started to go up. They abruptly reversed when the FED caused them to go down. I'm staying short in my maturities for now. That is what the market is telling me to do. LINK == The link is to the Investing.Com US Treasury Curve. Included is a "Month Ago" curve line as well. You can see by this graph that the Long-Term yields are rotating upward around the short-term yields.
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Post by newtecher on Oct 1, 2023 23:13:41 GMT
Interest rates move on an 80-year cycle as do most things human. The last peak in 1981 occurred about 40 years before the trough occurring in 2020. That was the first half of the 80-cycle we are currently in. I would expect that for the next 40 years rates will continue to rise until they peak once again. Any evidence for this claim of a 80-year cycle? A long history of US bond yields from Goldman Sachs shows nothing of the sort.
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Post by newtecher on Oct 1, 2023 23:27:41 GMT
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Post by anitya on Oct 1, 2023 23:27:43 GMT
Capital , I am trying to grapple with mean reversion as a credible investing theory, especially when it is not proposed in conjunction with Time. Please share what you know. A anitya , I look at the 10-year treasury as my base. Most rates, including mortgage rates, are tied to that rate. The long-term average of the 10-year treasury rate is 5.88% -- see the notation in the "Basic Information" on the right side of this LINKNow I will refer you to this GRAPH. If you move your curser over the graph you can see that we have been below that average since 2001 == just over 20 years. Interest rates move on an 80-year cycle as do most things human. The last peak in 1981 occurred about 40 years before the trough occurring in 2020. That was the first half of the 80-cycle we are currently in. I would expect that for the next 40 years rates will continue to rise until they peak once again. Capital , I finally got around to clicking on the links in your post. As much as the sources may be credible, I do not think it is scientific for them to take one interest rate cycle (one wave) and extrapolate to what the amplitude of the next cycle (wave) is going to be. Instead take a look at the graph of 10 yr going back to 1920s. fred.stlouisfed.org/series/H1RIFLGFY10PNM. You may have to add this discontinued series to the graph you linked to make it longer term. Better yet, just look at this /photo/1 I agree we could go up to 5ish% because of the pendulum effect (reversion through the mean) but we are already at the long term average (reverted to the mean).
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Post by Deleted on Oct 2, 2023 1:11:38 GMT
I do not invest in bonds. TLT price chart looks more like a stock than bond.
It hit a high of 171 in July 2020 and now it is at 88.69.
Never knew treasury bonds can do that. Are they not super safe almost like cash?
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Post by yogibearbull on Oct 2, 2023 1:30:39 GMT
Look at the SDs.
USFR 0.65 (Treasury FRNs) ICSH 0.74 (T_Bills, etc) SHY 1.92 (T-Notes) IEF 7.52 (T-Notes) TLT 14.50 (T-Bond)
They are safe by the credit ratings, but have volatility from the interest rates.
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Post by retiredat48 on Oct 2, 2023 2:08:22 GMT
I don't have an immediate reference, but my learning over the decades is that bonds go in approx 35 year bull/bear cycles...falling/rising rates. So this is about 70+ years in total cycle.
There are also assessments of bond fundamental reasons why this is so.
BTW There are theories that economies go in four fundamental cycles, lasting 25 years each (100 total) whereby history repeats itself. A reference being read by top CEOs and the Elon Musks of the world is: The Fourth Turning...by historian Neil Howe and the social scientist Peter Turchin. They consider we have just entered the fourth turning, the worst for society in the ebbs and flows of history. The fourth ends badly, just like the great depression of a hundred years ago back from the 4th turning cycle. Then recovery, and the cycle starts over again. I have read the book, and value the historical perspective.
R48
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Post by FD1000 on Oct 2, 2023 3:40:13 GMT
As usual, history, reversion, and cycles are interesting but do not tell you what will happen in the next 1-4-8 weeks and longer. On the other hand, markets thru prices and charts tell you everything in real time.
After years of watching and trading funds, it is easier and more predictable to trade lower volatility stuff.
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Post by newtecher on Oct 2, 2023 3:57:42 GMT
I don't have an immediate reference, but my learning over the decades is that bonds go in approx 35 year bull/bear cycles...falling/rising rates. So this is about 70+ years in total cycle. There are also assessments of bond fundamental reasons why this is so. BTW There are theories that economies go in four fundamental cycles, lasting 25 years each (100 total) whereby history repeats itself. A reference being read by top CEOs and the Elon Musks of the world is: The Fourth Turning...by historian Neil Howe and the social scientist Peter Turchin. They consider we have just entered the fourth turning, the worst for society in the ebbs and flows of history. The fourth ends badly, just like the great depression of a hundred years ago back from the 4th turning cycle. Then recovery, and the cycle starts over again. I have read the book, and value the historical perspective. R48 R48, you probably know how this is gonna go from our inflation discussion. What is the evidence? Can you actually link to it instead of just mentioning things off the cuff? As far as history of rates go, I posted a graph above. It shows rates rising for about 35 years from 1945 to1980 and then falling for 40 years through 2020. That has happened exactly once and did not happen before then. What are "the fundamental reasons why this is so"? I looked up the fourth turning. It was a book written in 1997. The fourth turning was supposed to start in 2005 and end in 2025. In other words, the crisis period is about to end according to the authors instead of us just entering it. I suppose we shall see in a few years but I am not holding my breath.
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Post by Capital on Oct 2, 2023 9:52:12 GMT
anitya and newtecher from your posts I see that you disagree with my position. I respect that and will agree to disagree. I wish you well.
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Post by Capital on Oct 2, 2023 11:19:12 GMT
I don't have an immediate reference, but my learning over the decades is that bonds go in approx 35 year bull/bear cycles...falling/rising rates. So this is about 70+ years in total cycle. There are also assessments of bond fundamental reasons why this is so. BTW There are theories that economies go in four fundamental cycles, lasting 25 years each (100 total) whereby history repeats itself. A reference being read by top CEOs and the Elon Musks of the world is: The Fourth Turning...by historian Neil Howe and the social scientist Peter Turchin. They consider we have just entered the fourth turning, the worst for society in the ebbs and flows of history. The fourth ends badly, just like the great depression of a hundred years ago back from the 4th turning cycle. Then recovery, and the cycle starts over again. I have read the book, and value the historical perspective. R48 retiredat48 , This is the link to Lifecourse Associates. Among the founders are the authors of both "Generations" (their first book) and "The Fourth Turning" I have read both books and this site describes the process you related to in some detail. Nice to meet someone else who has studied this subject.
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Post by mnfish on Oct 2, 2023 12:20:52 GMT
From the interesting link Capital provided -
- The Global Financial Crisis (Fourth Turning, 2008-2029?) was recently catalyzed by the 2008 global financial meltdown—
- Most likely, this Fourth Turning will come to an end in the late 2020s, just as the rising Homeland Generation is beginning to embark on careers.
- Homeland (Artist, born 2005–?) This generation comprise the oldest Americans who will never recall any year of prosperity before the catastrophic global financial meltdown of 2008 (where we are now) - Homelanders literally spend more time “at home” (with their multiple digital platforms) than any earlier child generation in history. (can't argue that)
Still no reference as to the future price of TLT or if rate cuts are coming
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Post by Chahta on Oct 2, 2023 13:18:36 GMT
Seems to me that instead of saying bonds have a 35 year cycle, it would be better to say events or business or inflation have a cycle that interest rates follow. If it was not for Covid or inflation we would most likely still be close to 0%.
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Post by retiredat48 on Oct 2, 2023 14:50:06 GMT
Seems to me that instead of saying bonds have a 35 year cycle, it would be better to say events or business or inflation have a cycle that interest rates follow. If it was not for Covid or inflation we would most likely still be close to 0%. Chahta,...actually chahta, your premise is not entirely correct. To throw some more mud in the water. STOCKS tend to go in 17 year cycles....one half the bond cycle. Again, there is a host of reasons given for this cycle...including the one that says: WHEN A GENERATION IS HIT HARD BY A BEAR MARKET, (THEY GET SHY OF BUYING STOCKS) ,IT TAKES THE NEXT GENERATION TO SAY FUGGEDABOUTIT AND STARTS ACCUMULATING STOCKS, BUTTRESSED BY A RISING MARKET, AND THEY BECOME HAPPY. R48
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Post by retiredat48 on Oct 2, 2023 15:06:13 GMT
I don't have an immediate reference, but my learning over the decades is that bonds go in approx 35 year bull/bear cycles...falling/rising rates. So this is about 70+ years in total cycle. There are also assessments of bond fundamental reasons why this is so. BTW There are theories that economies go in four fundamental cycles, lasting 25 years each (100 total) whereby history repeats itself. A reference being read by top CEOs and the Elon Musks of the world is: The Fourth Turning...by historian Neil Howe and the social scientist Peter Turchin. They consider we have just entered the fourth turning, the worst for society in the ebbs and flows of history. The fourth ends badly, just like the great depression of a hundred years ago back from the 4th turning cycle. Then recovery, and the cycle starts over again. I have read the book, and value the historical perspective. R48 R48, you probably know how this is gonna go from our inflation discussion. What is the evidence? Can you actually link to it instead of just mentioning things off the cuff? R48 replies in bold...No. I'm 78 years old and cannot go searching my libraries of info to enable you or others having "all the evidence." At my age one gives "wisdom" from a lifetime of both being actively involved in the market, and having made investing a "hobby" for 55 years. .Delve deeper if you like...start with google, a resource I never had!
As far as history of rates go, I posted a graph above. It shows rates rising for about 35 years from 1945 to1980 and then falling for 40 years through 2020. That has happened exactly once and did not happen before then. R48: One can say The cycle from 1980 ended after the 2010 financial crisis when rates went to near zero...then flattened for a long time. About 35 years in my book, and what I used to GET OUT OF STANDARD ISSUE BOND FUNDS THEN. One cannot precisely pick the bottom of a flat line...so one can say we are in year four or five of the current up cycle. Also, since it may take 30 more years to peak, we see that interest rates do not go straight up in a straight line. This suggests a top in 10 year treasury coming soon, then decline for many months in yield...if not years. The business cycle suggest peak coming; the gvt borrowing needs and MMT (Modern monetary theory) suggests massive borrowing to support massive debts, that may keep LT rates higher. This is the unknown since the gvt has never borrowed so much.
From a statistical basis, you are right...there is not enough cycles to prove things to a mathematician. Can't solve this since the modern stock market only started in 1920's...so not enough cycles. So one deals with the evidence they have. BTW not a difficult call to say the bottom of the cycle was when interest rates hit zero!! The USA could not go to "negative rates" or everything collapses. BTW academics will tell you that in 1000 years of lending money, interest rates (vigorish) were never negative, and never zero!!
What are "the fundamental reasons why this is so"? could write a book on this. first comment above applies.I looked up the fourth turning. It was a book written in 1997. The fourth turning was supposed to start in 2005 and end in 2025. In other words, the crisis period is about to end according to the authors instead of us just entering it. I suppose we shall see in a few years but I am not holding my breath. Well, I found the book quite prescient. It gave a most probable cause of a future world decline was: A pandemic caused by a virus. It discussed what would happen. Hmmm, fast forward to Covid. We are lucky covid was actually not that severe. book also discusses extreme political division. Hmmm. book discusses trillions in debt catching up with societies. Hmmm. How about chatgpt putting millions of "academics types" out of jobs. Hmmm. How about immigration by the millions, overwhelming our healthcare and other benefit systems...hmmm.
No, no need for society to worry!
R48 in bold
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