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 ran a quick simulation. about 15% of the time you will outperform the market in a 10 yr time frame. lol
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
why the heck u need bonds in ur 401k
why would I want them anywhere but my 401k?
Smith Barney? Bunch a bitches. Old-time farts.You gotta want to jack the shit. You gotta play the game well, ya know, I mean in, out, get, grab, bonk.
You need to diversify your bonds, nigga.
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.
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
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+.
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! Shit 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"
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.
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.
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.
Pretty sure kr works in fixed income so she may be compromised.