re: Predictions on Bond Market Crash

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If you have the time span to hold the bonds to maturity, does it really matter what the values do? Honest question because I have a bunch of municipal bonds in my portfolio and my understanding was that as long as I hold them to maturity I get face value back plus all interest it produced. It is, however, very unnerving seeing the beating these bonds are putting on principal balance.

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Take a look at Federal Tax Revenue and Federal Spending. Notice how they're heading in opposite directions, and fast? The declining face value of long bonds is represented by the growing gap between those numbers. That gap will get covered with printed money which devalues the purchasing power of your bond at maturity. The difference in size of that gap between when you purchased the bond and maturity represents your corresponding loss in purchasing power.

The nominal value of your 30 yr bond remains. Let's say you have a $100k 30yr bond and you plan to buy a $100k car with it at maturity. You will absolutely be able to do so but you'll probably be disappointed when it turns out it's a used Corolla instead of a new 7 series.