Bonds Correction - where?

[Deleted]

I saw some posts about bonds corrections. I do not have any bonds except for what is in wellington.

I saw agg is down -2.15% YTD and DBLTX is down -1.27% YTD. So what are people getting so excited about?

[Chahta]

A buying opportunity.

[Deleted]

at 2% decline?

[chang]

Feb 26, 2021 0:56:23 GMT Chahta said:

A buying opportunity.

I'm not sure, since IT/LT Treasury yields strike me as jokingly low. But in municipal bonds -- a very definite "maybe". I made my first (small) add yesterday.

[Chahta]

Feb 26, 2021 2:25:27 GMT @waffle said:

at 2% decline?

2% in equities is not much. But for bonds it is.

[steadyeddy]

@waffle, please see this video to put things in context on impact of bond yields on growth stocks.

[Chahta]

Feb 26, 2021 8:51:40 GMT chang said:

Feb 26, 2021 0:56:23 GMT Chahta said:

A buying opportunity.

I'm not sure, since IT/LT Treasury yields strike me as jokingly low. But in municipal bonds -- a very definite "maybe". I made my first (small) add yesterday.

I was thinking muni and multi-sector that have corrected. But then again stocks are looking better too.

[retiredat48]

Feb 26, 2021 0:40:23 GMT @waffle said:

I saw some posts about bonds corrections. I do not have any bonds except for what is in wellington.

I saw agg is down -2.15% YTD and DBLTX is down -1.27% YTD. So what are people getting so excited about?

Kinda exciting when TLT, the LT Treasury bond etf, goes from a price of $161/share, last November, to a price of $139 yesterday.

And kinda exciting when I watch various guru fund managers come on CNBC, stating to stay away from bonds of ANY duration...that bonds are "un-investable at year-end low rates."

And kinda exciting when I see, the best consensus of stock and bond fund guru's is: to expect a 2 handle on the 10 year Treasury bond by year end.  That is 2% or more yield, which gets there only by NAV bond prices continuing to fall.

Kinda exciting if you took in last year, the largest portfolio cash position ever in MM funds/very short term bond funds,  selling all standard issue bond funds, as being way too risky.  And to see that risk play out.

Kinda exciting when you listen to bond guru Jeff Gundlach discuss the benefits of cash, pointing out that during the bond bear market of the 1970's decade (and rising inflation), Money Market Funds were the best real return bond investment of that period.


R48

[Deleted]

Feb 27, 2021 0:24:50 GMT steadyeddy said:

@waffle , please see this video to put things in context on impact of bond yields on growth stocks.

Thanks. That was a good video. But would not rise in bond yields negatively impact dividend paying stocks (typically value stocks) a lot more than growth stocks.

Any negative impact on growth stocks would be rather short term and could be a buying opportunity as the video also said.

[Deleted]

I do not have any bonds funds or etfs, except what Wellington holds. Wellington is 8% of my retirement portfolio.

But it is very interesting - "guru fund managers come on CNBC, stating to stay away from bonds of ANY duration...that bonds are "un-investable at year-end low rates."

[Norbert]

Looking at last week's market action, I see that equity sectors were impacted by surging bond yields relative to their last 12 months' gains. The higher the trailing returns, the harder last week's hit.

For example ...

- Clean Energy (ICLN) up over 100%, but down about 10% last week

- MATFX up 95%, down 9%

- US LC Growth up 58%, down 5%

- Tech (XLK) up 50%, down 4%

- US LC Value (IVE) up 20%, down under 1%

- SCHD up 36%, down under 1%.

I conclude that last week was a reaction to surging bond yields, but it was also a correction of overbought and overvalued sectors. There was no broad market selloff.

What's next? I don't have a clue, but I remain nervous about the pricey, growthy stuff. Last week didn't really do very much to fix the high valuations problem. I don't see this as a serious buying or rebalancing opportunity. As posted before, have been taking profits in overvalued high flyers and favoring divvie and value stuff. But, I remain high in cash and went down to 30% equities.

PIMIX is flat YTD, TMSRX has been making a little money, PTIAX is off 1%. Not a big deal.

FWIW.

[Chahta]

Norbert, I have mentioned it somewhere else, but I believe that munis and some other type of bond funds were over-bought. I talked to a PM (or assistant) at Performance Trust. He indicated with interest rates going up investors sold munis. Looking at NAV charts, the ones I own are near all-time highs. PIMIX, PTIAX are not. Looking at StockCharts with RSI and MACD turned on many munis look like buys. I am no TA guy but look at them for historical info, not momentum trading. The ones I follow/own have gone well below their 50 DMA and are close to the 200 DMA. And as chang , said they "always come back."

But then again I may have a fool as an advisor.

[steadyeddy]

Feb 27, 2021 9:25:39 GMT @waffle said:

Feb 27, 2021 0:24:50 GMT steadyeddy said:

@waffle , please see this video to put things in context on impact of bond yields on growth stocks.

Thanks. That was a good video. But would not rise in bond yields negatively impact dividend paying stocks (typically value stocks) a lot more than growth stocks.

Any negative impact on growth stocks would be rather short term and could be a buying opportunity as the video also said.

@waffle , sustained high bond yields pose risk to all equities. But, when yields start rising (initial phase) the air out of growth stocks goes away more than the air out of value stocks. Since cost of capital goes up, any company that runs on borrowed money (Utilities/REITs etc) will suffer also.

But to your point, over time, things shift and every equity suffers if yields continue to stay higher. A slow creep in yields can be absorbed by stocks but sudden rises cause turbulence.

Also, Norbert posted a nice response as well.

[anitya]

Negative response to rising bond yields and correcting overvalued stuff can be the same because treasury yields are at the core of valuation.

Those prices that reversed yesterday proportionately are more tied to bond yields and the others that over or under reacted yesterday are likely speculated more and less tied to bond yields.  Speculation is in terms of objects of affection or dislike that is more driven by feelings and less by simple math.

You see some stuff that corrected hard as bond yields rose but yesterday’s reversal of bond yields had a muted reaction on that stuff - driven by things other than simple math!  I would try to stay away from this stuff for some more time.

Do not you think Allocation funds (and whatever is in them) are driven more by simple math and less by feelings?

[fred495]

In a sea of red ink, why is RCTIX, a multisector bond fund, up 0.73% today? Anybody have a clue?

Thanks,

Fred

[anitya]

Mar 4, 2021 5:03:09 GMT fred495 said:

In a sea of red ink, why is RCTIX, a multisector bond fund, up 0.73% today? Anybody have a clue?

Thanks,

Fred

I have not studied this fund in the last 6 months.  My recollection is this fund has an explore sleeve and that sleeve produces once in a while unusual pop ups.  If you look at the past few years, you will see a few one day pop ups that are not again repeated for months. 

[fred495]

Thanks, anitya, I wasn't aware that RCTIX has this special feature.

I guess I am somewhat more cautious than usual since reading over at the MFO Forum that at IQDAX "the Chief Investment Officer of Infinity Q had been adjusting the methodology for obtaining certain asset valuations, and that the resulting valuations may not have accurately reflected the fair value of those assets."

Fred

[yogibearbull]

RCTIX uses exotic mortgage derivatives. www.rivercanyonfunds.com/

[Chahta]

Mar 4, 2021 14:01:13 GMT fred495 said:

Thanks, anitya, I wasn't aware that RCTIX has this special feature.

I guess I am somewhat more cautious than usual since reading over at the MFO Forum that at IQDAX "the Chief Investment Officer of Infinity Q had been adjusting the methodology for obtaining certain asset valuations, and that the resulting valuations may not have accurately reflected the fair value of those assets."

Fred

Since bonds funds set the NAV daily by "accounting procedures", I just don't trust this type of asset. I believe that there is some judgement by them involved in setting the NAV.