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Bonds?

With rates getting close to 3%, is it time to allocate some money to bonds? Does anyone have any particular investments in mind, or are rates still a bad value overall?

Please discus. Tank.

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i ran a quick simulation. about 15% of the time you will outperform the market in a 10 yr time frame. lol

I love my cheese. I got to have my cheddar.

ohai wrote:

With rates getting close to 3%, is it time to allocate some money to bonds? Does anyone have any particular investments in mind, or are rates still a bad value overall?

Please discus. Tank.

I always thought bonds are to reduce overall volatility, not to enhance return. 

Depends in the account you put it in, tax-advantaged or taxable. I would go with intermediate term treasury and intermediate term munis respectively, with the sprinkle of i-bonds.   

Personally all my fi allocation is in 401k in stable value fund, as I don’t have any other options. 

krnyc2008 wrote:

ohai wrote:

With rates getting close to 3%, is it time to allocate some money to bonds? Does anyone have any particular investments in mind, or are rates still a bad value overall?

Please discus. Tank.

I always thought bonds are to reduce overall volatility, not to enhance return. 

Depends in the account you put it in, tax-advantaged or taxable. I would go with intermediate term treasury and intermediate term munis respectively, with the sprinkle of i-bonds.   

Personally all my fi allocation is in 401k in stable value fund, as I don’t have any other options. 

Tank

Hey Hamilton, have a holly jolly Christmas.

why the heck u need bonds in ur 401k

"You want a quote? Haven’t I written enough already???"

RIP

igor555 wrote:

why the heck u need bonds in ur 401k

why would I want them anywhere but my 401k?

Smith Barney? Bunch a *****es. Old-time farts.You gotta want to jack the ****. You gotta play the game well, ya know, I mean in, out, get, grab, bonk.

You need to diversify your bonds, *****.

It’s whatever, just make it count.

- kDot

Do you guys think the rates will continue to increase in a significant way? If so then I’d say commodities and TIPS would be a good bet. I also agree that this would be more to decrease volatility than generate high growth.

krnyc2008 wrote:

igor555 wrote:

why the heck u need bonds in ur 401k

why would I want them anywhere but my 401k?

but why do you need bonds in general. you are young and have a boatload of time on your side.

only way im holding bonds is tactical allocation 

"You want a quote? Haven’t I written enough already???"

RIP

agreed. bonds only make sense as inexpensive market protection. if the equity market falls 50% from peak, you better be selling all of your bonds for equities. unless you’re 50+.

igor555 wrote:

krnyc2008 wrote:

igor555 wrote:

why the heck u need bonds in ur 401k

why would I want them anywhere but my 401k?

but why do you need bonds in general. you are young and have a boatload of time on your side.

only way im holding bonds is tactical allocation 

Like I said - it reduces portfolio volatility. People tend to overestimate their risk appetite and end up selling at the worst possible time

It also allows one to re-balance during the down market which is an intelligent way to market time if you wish. If one holds treasuries, it’s possible that fund will go up in value during the crash (due to flight to safety), which will provide an additional benefit.

^

huh 

I agree with Krnnyc. Like I said there is 15 percent chance bonds can win. Flight to safety is one scenario and deflation is another. You really want to own bonds at that point. Let me remind you, it wasn’t that long ago we had negative rates, it can happen! **** happens!

but personally I feel neither scenario is what will happen as I feel rates are goin to rise.

Bonds are pure math, the moment rates rise. As a great man once said:

“If money doesn’t loosen up, this sucker will go down”

I love my cheese. I got to have my cheddar.

Yes to fixed income. I’ve got some preferred stocks paying 6-8%. But bonds are dumb unless you’re really old. And treasuries are 100% default certain.

^treasuries are a put option on America.

What do you mean rates are getting close to 3%? Fed funds rate or do you mean the 10-year treasury yield?  Inflation is still low, although looking like it’s coming back, so rates are still negative which is why the stock market hasn’t imploded yet.  

Once fed funds rates get closer to 3%, I think we’ll see the equity market struggle for gains, even with strong underlying data.  You can almost extrapolate out when fed funds rates will be close 3%, I think that’s when the equity market plateaus and bond yields flatten out.

I think the above is evident in the market’s reaction in late January when we started to see stronger headline data which led some to believe the fed’s rate trajectory was steeping.  The market knee jerked to rediscount higher rates, which was pretty violent.

"You want a quote? Haven’t I written enough already???"

RIP

private credit homie. thats where institutional money is flowing. floating-rate. very nice yield. you can get nasty with some mezz funds or roll with senior secured depending on your opinion of credit cycle. mezz funds-I stick with publicly traded vehicles so i have liquidity. i stay more defensive on the private side. i dislike how tight spreads are.

CLOs or BDCs. taxed as ordinary income (minimal cap gains) tho so look to place them in a qualified vehicle to minimize tax drag. 

I'll turn this damn bus around.

David Rosenberg (economist at Gluskin Sheff) basically said in his last weekly pub that allocating some into long bonds makes some sense since inflation might disappoint.

I agree with Mr. Cheese.  I don’t like how incredibly tight spreads are now; you are not getting paid for the risk.  Private credit also has a lot of problems these days from too much capital chasing yield.  There are fewer covenants (i.e. “covenant light”), multiples are stretched, etc… I would stay away unless you are the senior piece and/or somehow have some vintage diversification.

PA, if the US truly defaults on its debt anytime soon then there really won’t be many places to hide…

i read rosenberg too. breakfast with dave. good stuff. 

I love my cheese. I got to have my cheddar.

Pretty sure kr works in fixed income so she may be compromised. 

CFABLACKBELT wrote:
PA, if the US truly defaults on its debt anytime soon then there really won’t be many places to hide…

They said the same when I warned about subprime. And then I’m the guy who lost $0 in the crash.

Sweep the Leg wrote:

Pretty sure kr works in fixed income so she may be compromised. 

I am in structured credit. But I actually hold very little bonds for my age..

purealpha wrote:

CFABLACKBELT wrote:
PA, if the US truly defaults on its debt anytime soon then there really won’t be many places to hide…

They said the same when I warned about subprime. And then I’m the guy who lost $0 in the crash.

You’re truly the Charlie Sheen of investing.

#winning

If you can’t find anything else of value, no problem buying ST bonds of money-good companies. Getting almost 3% for a little over a year.  Compare that with 3.15% on the 30 year treasury with a duration of what, 20?  No thanks.

Great place to park dry powder. I do it because I am very risk-averse and don’t want to risk anything unless I have a good risk/reward ratio. Those are in short supply in these markets so I end up with a lot on the short end of the yield curve now. (no HY now either).

purealpha wrote:

They said the same when I warned about subprime. And then I’m the guy who lost $0 in the crash.

When did YOU warn about subprime? I failed to find it here on the forums…. lol.

Man you must be so rich by now.

PistolPt wrote:

When did YOU warn about subprime? I failed to find it here on the forums…. lol.

From 2003-2007. You mean where? Everyone in the office heard it for 5yrs, probably posted on AF but it was under a different name.

PistolPt wrote:

Man you must be so rich by now.

Sorry you suck at finance/markets, but that’s not my fault.

PistolPt wrote:

If you can’t find anything else of value, no problem buying ST bonds of money-good companies. Getting almost 3% for a little over a year.  Compare that with 3.15% on the 30 year treasury with a duration of what, 20?  No thanks.

Great place to park dry powder. I do it because I am very risk-averse and don’t want to risk anything unless I have a good risk/reward ratio. Those are in short supply in these markets so I end up with a lot on the short end of the yield curve now. (no HY now either).

I don’t disagree in principle, but spreads are incredibly narrow…

I parked some more cash in preferreds during the dip, 6% yield. Looking for a 2-3% gain as people realize Powell won’t raise as fast as he says, then out with the gain + a few months dividends.

my fav place to be right now is CLOs esp with rising rates.

OXLC owns the equity pieces.

"You want a quote? Haven’t I written enough already???"

RIP

CFABLACKBELT wrote:

I don’t disagree in principle, but spreads are incredibly narrow…

All spreads yes, but good IG companies with money good ST bonds shouldn’t widen much when everything else does, at least by much. HY spreads are absurd presently, I agree.

purealpha wrote:

From 2003-2007. You mean where? Everyone in the office heard it for 5yrs, probably posted on AF but it was under a different name.

Which name? Why the change?