Bond Mutual Funds - for sale
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Bond Mutual Funds - for sale
Posted by matthew25 on 6/8 at 10:43 pm
The bond funds are getting beat up quite badly. Worst in a decade.

I'm selling Vanguard Inflation Protected (4.62% loss), Vanguard Long Term (4.83% loss last month) and Vanguard Intermediate Munis (1.43% loss in last month).

At least my losses haven't been as bad as those mentioned in NY Times article yesterday about a major bond fund being down 13.4% (Pimco Corp Oppty), iShares mortgage ETF lost 10.4%, a REIT that invests in mortgages lost 8.7%. and long-term treasury bonds lost an average 6.8% in May, according to Morningstar; and Vanguard's Extended Duration down more than 6% in May.

If these were stocks, it would be lead story on nightly newscasts.




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Posted by Coeur du Tigre on 6/9 at 2:47 am to matthew25
Yeah Matthew, I feel your pain. These are the times when I wonder about the truism that the market has already priced in all future events. I suspect leverage has more to do with the strength of these drops than fundamentals.


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Posted by fishfighter on 6/9 at 6:38 am to Coeur du Tigre
I dumped all my bonds about a month ago. When gold started falling, it was time.


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Posted by Fat Bastard on 6/9 at 10:02 am to matthew25
got out of my domestic munibond fund and corporate bond fund quite some time back. looks like perfect timing. I still do have a global bond fund in my 401k that is doing well though but nothing domestic and I do not like treasury bonds.


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Posted by Fat Bastard on 6/9 at 10:03 am to fishfighter
quote:

I dumped all my bonds about a month ago


Been coming for awhile. Myself and other investors had talked about this over a year ago. You could see it coming.


This post was edited on 6/9 at 10:04 am

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Posted by matthew25 on 6/9 at 4:43 pm to Fat Bastard
I knew it was coming, but I thought bonds wouldn't drop until Ben's Golden Money Faucet was turned off. Are we headed to repeat of 1994 when bonds dropped 25%?


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Posted by GenesChin on 6/9 at 6:33 pm to matthew25
How did bonds recover after 1994 and would it be worth it to invest some money in them if there is a huge correction?


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Posted by Coeur du Tigre on 6/10 at 3:52 am to GenesChin
quote:

How did bonds recover after 1994 and would it be worth it to invest some money in them if there is a huge correction?
Good question. We need to start with a look-see at 1994.

"Between January and September 1994, the U.S. 30-year long bond’s yield jumped more than 150 basis points to 7.75%. The proximate trigger was a Federal Reserve rate hike as it started to tighten policy following recovery from the 1991 recession. But while changes in inflation and official interest rate expectations might have had a little to do with the U.S. bond market’s performance, they weren’t really behind the generalized bond market selloff, according to a Bank for International Settlements post mortem the following year.

Instead, it seemed that the bond market’s own internal dynamics had more to do with the widespread selling than any macroeconomic factors — volatilities across major markets jumped between 10 and 20 percentage points, whatever the local factors." (Mash here.)

Table of Intermediate returns:



'...jumped between 10 and 20 percentage points'? A bond market? That only says one thing to me: leverage. So what we're asking is, "Is the current bond market volatility due to anticipated interest rate hikes from the Fed or too many players with too many option calls?" Yeah.

With no current sign of inflation increasing or even yawning and stretching, would the Fed increase anyway in order to re-inflate rates? Without the underlying increase in real inflation? That would mean the Fed would pay higher interest with un-inflated dollars. Uh, no.

So should we look at 1994 for insight to today's bond market? Yes, we can. But it may be better to look at 1995.


This post was edited on 6/10 at 3:55 am

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Posted by matthew25 on 6/17 at 10:01 pm to matthew25
Just bailed out of PIMCO long-term credit (PTCIX). At one point it was up 4.3 this year. Now it is down 2.1 YTD.

Looks like only the short-term bond funds will eke out a small gain this year.



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Posted by matthew25 on 6/25 at 12:46 pm to matthew25
If I were still holding PIMCO long term I would be down 7.5% YTD. Vanguard inflation-protected down 9.1%.

Holding a lot a cash now. What to do?



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Posted by tirebiter on 6/25 at 2:06 pm to matthew25
Welcome to Hell, blind boy, or so the line went. CD's, stable value funds if you have access, and online savings/money markets aren't the worst thing in the world if you are more concerned about capital loss vs beating inflation & taxes. Yet another reason when rates were good FI investors should have added I-bonds, EE's, individual treasuries, etc. Bond funds are likely to be unpleasant to hold the next few years, no matter if short duration or not, and will likely add little support during equity declines unlike in the past.

OTOH, it might be a better buying opp than a year ago, but it still is a matter of when, not if, rates move against you. I'm not going to get into the "reinvest dividends back into a fund, you eventually will earn out" as a capital decline is a capital decline on money investors would view as relatively safe, especially if one is not making large periodic future investments. Thank Ben, his policies don't work so well for savers or risk averse investors.



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Posted by dewster on 6/25 at 3:12 pm to matthew25
Reduced my stake in VWINX a little 8 weeks ago, but I'm still in for now. It's balanced enough.


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