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Bonds have been an overcrowded trade for a long time because everyone bought into the 40-60% bond allocation "rule".

Then you have the central banks buying bonds to lower interest rates. They are literally manipulating the bond market and people put 60% of their wealth into that

As a contrarian I could see now being a good time to buy some bonds but it hasn't been a good trade for a long time. The upside potential is capped by central banks

There are much better places to store dry powder imo.
Oh where would you store your dry powder?
 

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Someone explain how bonds are a good investment while interest rates are rising rapidly? Since, the value of the bonds you bought are going down with each rate hike and even if you hold them until maturity, unless you need the interest income now, you can wait around 6 months and get more yield for your money.

Maybe because you are taking a loan to buy bonds and use the income from the bond to pay the interest on the loan but how do you have a bond yield higher than the loan payments?

I don't understand so I figure people buying bonds just don't know or can't wait 6 months for higher yield. I think you can probably hold cash in a high interest savings account, withdraw an equal amount in cash as you would get from bond yield and buy the bond after a couple rate hikes and come out on top.
 

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Bonds are for people who can't do math

They just heard everyone should have x% bonds and buy them without checking the math. Bonds have risk but are too saturated from the blind faith in gospel of bonds

This was evident to anyone who understood rates long before the bond crash
 

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Someone explain how bonds are a good investment while interest rates are rising rapidly? Since, the value of the bonds you bought are going down with each rate hike and even if you hold them until maturity
Bond funds have rather predictable returns over the long term. Yes the bonds decline in value with each rate hike, but the bond funds will still produce positive returns over longer time horizons. The bonds DO provide a guaranteed return to maturity. And bond funds effectively do hold the bonds to maturity, so they aren't going to lose money -- in the long term.

For example if you hold XSB, this fund holds mostly bonds that mostly mature in less than 5 years. By 2027, all the bonds in the portfolio will have matured and produced positive returns.

I think you can probably hold cash in a high interest savings account, withdraw an equal amount in cash as you would get from bond yield and buy the bond after a couple rate hikes and come out on top.
It's very unlikely you can time the exact "top" in the rate hiking cycle. This kind of timing between cash & bonds is very tricky, so you may or may not perform better than passively holding bonds or GICs.

Many people are going to sit in cash, anticipating higher rates to come. At some point the rate hikes will be done, but people are not going to realize it. You can't know in advance when this will happen because it will depend on inflation readings, economic outlooks, and credit market health... a complex soup of conditions, plus subjective opinions of the central bank policy makers.

People who keep holding onto cash, even as rates start falling again, will underperform those who remained invested in bonds.

Or we might have some economic catastrophe much sooner than people think. For all we know, today's 3% to 3.5% yields in bonds could be as high as we're going. The central banks may reduce rates again. Someone who waited out the whole thing in cash will have forfeited the higher yields they could have collected.
 

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A milestone today. XBB now has a 4.0% yield to maturity. The other big bond ETFs (VAB, ZAG) will be similar.

Also noteworthy I think, XSH (short term corporates) has 4.5% yield to maturity. The reason it's higher than XBB is, the yield curve is flat and corporates have higher yields (a spread).
 

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XLB yields 4.37% and YTM 4.55%.
I will start buying.
But long bonds have very significant duration = interest rate exposure.

If interest rates keep trending up (as they have ever since 2020), there might be very significant declines still coming in XLB. And the time horizon is also very long... if you were to hold XBB (intermediate term) for example, holding it for 10 years gets you a pretty reliable positive return as the whole portfolio would mature and roll over by then.

But if you hold XLB, your time horizon has to be 20 to 30 years, I think.
 

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And I'm happy to tell you that the past 10 years have been the worst 10-year return of the last 50 years. So hopefully it should get better?

We're currently having the worst return in every rolling period, with one exception for the 4-year roll, but I guess once June 2022 returns are out, it'll be the worst everywhere.

40 years of decreasing rates, are we at the inflexion point?

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Looks like Japanese yield curve control just failed as 10-year rocketed up 80% in a day

Europe still has negative rates and just held an emergency meeting to save sourthern Europe with more QE. Central banksters are losing control. Higher rates could break a lot of things in legacy finance

How long before the J-Pow pivot 2.0? That would be a glorious reversion. Let's go J-Pow
 

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Do you mean him chickening out and pausing or cutting rates? I worry about this too.
I feel like even a hold, or a hint of holding, would cause a massive reversal because markets are pricing forward increased rates

I don't know when that will happen but if markets start to collapse they don't have much choice

The last time they tried to taper pre-pandemic it failed. How is it supposed to work now?
 
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We're currently having the worst return in every rolling period, with one exception for the 4-year roll, but I guess once June 2022 returns are out, it'll be the worst everywhere.
Can you kindly explain more about rolling period?
Is it buying the same bond when it is matured?
Thanks.
 

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Can you kindly explain more about rolling period?
Is it buying the same bond when it is matured?
Thanks.
The rolling period is a way to see what kind of performance we've had in the past for a specific time window.

A 5-year rolling period means that we calculate the historical performance of every 5-year windows in the past, say from 2000-2004, from 2001-2005, from 2002-2006 and so on. And then we make stats with those values. So I was simply saying that we're currently having the worst performance ever for almost every time window.
 

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Fed is already starting to sound dovish today

They more paper hands than I thought :LOL:

What a mess
 

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Bond market is getting volatile in Japan

Not a lot of mainstream coverage yet but sounds like BOJ printing yen like there's no tomorrow (thanks Japanese boomers) while the rest of the central banksters are trying to tighten

Europe is not looking so good either
 
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