We are in a time of utter reverence for great and powerful Oz - like people doing not so great things to the rates of interest that would be paid to savers and prudent people (Zero Interest Rate Policy or ZIRP), and doing wonderful things for leverage (substance) users, speculators and asset owners (MBS and long - term
T bond buying).
Not exact matches
Next and pre-2008 in the USA, the fed did not
buy new gov»
t bonds and did not do QE.
Instead, the Fed may let their $ 75B monthly
T -
bond purchases stop in late June (as planned) but continue to use the $ 20 - 25B monthly proceeds of maturing
bonds to
buy more
T -
bonds.
Therefore, short selling iShares 20 + Year
T -
bond ETF ($ TLT) is technically better than
buying $ TBT.
Buying a 30 year
T -
Bond and then panicking about its 1 day performance because you have a 30 day time horizon is, quite frankly, silly.
I strongly recommend purchasing individual GICs,
bonds or
T - Bills instead of
buying any
bond fund.
But why pay anybody any MER at all to hold a government
T - Bill or
Bond when you can
buy it yourself and be nearly guaranteed a positive return at maturity?
I agree that he should
buy short term
bonds (or GICs or
T - Bills in my particular suggestion) but to
buy the actual
bond, not a
bond fund.
Depending on your comfort level, the idea of choosing fixed income other than government
bonds / GICs / cash has some appeal (especially with historically low gov»
t bond yields) but just be sure you understand the products you are
buying, the inherent risks, the embedded options, the liquidity, the seniority of the debt.
@Rick Francis (# 4): «If I
buy a corporate
bond, why canâ $ ™
t change the interest rate if the corporation defaults on some other
bond?»
But if you wanted to sell your
bond on Friday, no one's going to
buy unless unless the buyer can earn 2.335 % on her investment — the rate at which 10 - year
T -
bonds closed on Friday.
Let's say you
bought for $ 1,000 a 10 - year Treasury
bond on November 4th, and that the
bond's rate was 1.738 % — the rate at which
T -
bonds closed that day.
If you want to brag about how it doesn'
t matter that you
bought stocks in the tech bubble because at least you earned dividends for the next 10 years, it's disingenuous not to mention that you'd have been better off
buying T -
bonds at 8 % back then and earning a hell of a lot more income with significantly less risk.
If you
buy Treasury
bonds directly, it may be that coupon - paying
bonds are significantly cheaper than
T - Bills.