A Canadian ETF that holds to maturity a ladder of 5
year bonds seems to capture all the worst aspects of the price curve.
Not exact matches
Concerns over the French presidential election
seemed to have eased slightly on Monday with the yields on the 10 -
year French
bond falling.
The 10 percent average return on the S&P 500 may not
seem impressive at first, despite the fact that it's more than double what one can expect from a 30 -
year Treasury
bond and way more than what a certificate of deposit from a bank pays.
A
year ago, it
seemed, everyone was saying that 2014 would be a lousy one for
bonds.
Progress in a few areas has been solid: slashing of bureaucratic red tape has led to a surge in new private businesses; full liberalization of interest rates
seems likely following the introduction of bank deposit insurance in May; Rmb 2 trillion (US$ 325 billion) of local government debt is being sensibly restructured into long - term
bonds; tighter environmental regulation and more stringent resource taxes have contributed to a surprising two -
year decline in China's consumption of coal.
This is pretty massive volatility for
bonds, although the one
year loss
seems to have a floor at around 10 %.
In contrast,
bond market exposure (in the form of yield curve and spread risk) has played a relatively minor role in driving convertible
bond risk and return in the recent past and
seems likely to play a minor role in the
year ahead, based on our model.
FOMC members now
seem more eager than ever to «normalize» policy, that is raise short term rates into line with historic norms and, to the extent possible, unburden their balance sheet of the huge
bond holding they had acquired over the last few
years.
Seems as if you added 600k this
year to
bonds.
Sure, you can devalue those claims through inflation, but only if the debt is in the form of long - maturity
bonds (which is why the recent discussion of issuing 50 - 100
year Treasury
bonds seems understandable but also a bit nefarious).
We also mentioned that the initial spike in
bond yields after President Trump was elected
seemed unlikely to continue this
year.
In this context, a U.S. 10 -
year bond offering a roughly 2 % yield and, backed by a strong currency, actually
seems appealing.
The fidelity global inflation linked
bond fund Y has a duration of 5.5
years which
seems to be the lowest of the funds freely available.
Tuesday April 24: Five things the markets are talking about U.S dollar bulls
seem to have finally found some much needed support from interest rates as U.S
bond yields climb toward levels unseen in nearly four -
years.
The narrative of higher rates being a headwind for gold
seems to be falling apart, as the 10
year yield in the US
seems to be on an upswing, and gold is rallying at the same time that
bond values fall.
Fed Chairman Ben Bernanke said late Wednesday that moderating
bond purchases amounting to $ 85 billion a month later this
year seems to make sense given the central bank's optimism regarding the U.S. economic outlook.
Looks like John O'Korn and Brandon Peters, two QB's fighting for the starting Michigan quarterback position next
year,
seem to be
bonding well.
As the world around them
seems to mirror their own chaos and confusion, Ruth and Alex realize the same
bond of love that has kept them together all these
years will allow them to see their way through this crazy weekend as well.
That might
seem surprising — especially given the other, more prominent names on the
Bond shortlist — but just look at what Kaluuya's been up to in the past
year.
Until last
year, the idiosyncratic Scottish auteur behind «Ratcatcher» and «We Need to Talk About Kevin» wasn't even a remotely plausible candidate to direct a blockbuster spy movie that comes with a full set of baggage — prior to her most recent film, Ramsay
seemed as well - suited for James
Bond as Apichatpong Weersethakul does for the next «Star Wars» spin - off.
To read recent headlines, the idea of state leaders building stronger
bonds between district leaders and unions on critical issues
seems far - fetched, with two - fisted battles between unions and elected officials, mostly Republicans, having erupted this
year in Wisconsin, Ohio, Indiana, and other states.
«In the same
year that we celebrate our 50 -
year relationship with 007, it
seems doubly fitting that today we unveiled this wonderful new sports car created especially for James
Bond,» said Dr Andy Palmer, CEO of Aston Martin.
In this context, a U.S. 10 -
year bond offering a roughly 2 % yield and, backed by a strong currency, actually
seems appealing.
On Tuesday, in response to evidence of accelerating yield pressures, as well the recognition that QE2 was much further along than investors widely
seem to believe, we substantially cut our
bond duration to about 1.5
years in Strategic Total Return.
Having had a quick look at some ETFs it
seems that their price can fluctuate (i.e. is not always on a slow upward trend; see iShares 1 - 3
Year International Treasury
Bond ETF), which
seems to disqualify using them as a temporary hedge against counterparty risk with some small positive interest.
But given today's low interest rates (recently about 2.3 % for 10 -
year Treasuries) and relatively rich stock valuations (Yale finance professor Robert Shiller's cyclically adjusted P / E ratio for the stock market recently stood at 29.2 vs. an average of 16.7 since 1900), it would
seem to strain credulity to expect anything close to the annualized returns of close to the annualized return of 10 % for stocks and 5 % for
bonds over the past 90
years or so, let alone the dizzying gains the market has generated from its post-financial crisis lows.
A decades - long trend of falling interest rates and falling inflation — and inflation expectations —
seemed to have ended, as the 10 -
year U.S. government
bond yield broke the downward trend since 1987,» says chief strategist at Sparinvest David Bakkegaard Karsbøl in his monthly comment for February.
In particular, it
seems clearly false that
bonds were a better hedge than stocks in this period, just by the simple fact that
bonds only outperformed stocks for three
years in this window, and only then by a very slim margin.
If your looking to buy a home, and the price
seems to high, compare to the risk free rate... you may be better off buying a
bond and waiting ten
years..
In global government
bond markets today, investors
seem to be standing atop tectonic plates, which are moving slowly yet predictably, defying simple rules of thumb about risk - free investing, and rendering the last 40
years of historical data a very poor guide for making decisions about the future.
After seven
years or so of pundits crying wolf that interest rates are about to surge and send
bond prices reeling, it
seems that the time for rising rates has finally arrived.
Has there ever been a time in the past 100
years where cash,
bonds and stocks all
seemed to offer such poor future returns?
Problem is, paying 4.1 % to others doesn't
seem so cheap when you can only earn 2.4 % by buying 10 -
year Treasury notes or just 2.8 % with intermediate - term corporate
bonds.
Lest I merely
seem to be a critic, I have another idea that I think is more powerful: Issue 40 -, 50 -, 75 -, and 100 -
year bonds.
The consensus
seems to be that interest rates will rise and
bonds will get whacked next
year.
However, having a portfolio of 100 % real return
bonds seems not only foolish but also risky for those with many
years until retirement.
In an article in Fortune magazine last
year, Warren Buffett has this to say about
bonds: Today, a wry comment that Wall Streeter Shelby Cullom Davis made long ago seems apt: «Bonds promoted as offering risk - free returns are now priced to deliver return - free risk.&r
bonds: Today, a wry comment that Wall Streeter Shelby Cullom Davis made long ago
seems apt: «
Bonds promoted as offering risk - free returns are now priced to deliver return - free risk.&r
Bonds promoted as offering risk - free returns are now priced to deliver return - free risk.»
Yet assuming
bonds will continue to yield just 2.6 % for 20 or more
years seems unnecessarily conservative.
Back - of - the - envelope calculations show that the latent heat absorbed by melting of ice after surges (e.g., the melting of > 1500
years of ice accumulation during Dansgaard - Oeschger events — which
seem to have happened in unison across the northern hemisphere, or the longer > 5ky
Bond cycles) can significantly contribute to the global energy balance.
Thinking of
Bond Events; there
seems to be a natural oscillation with a 1,500
years or so periodicity; so «balance» is never actually achieved.
Of course, the
bond interest might not quite be enough to cover the traditional LTC premiums right now (and therefore deplete principal slightly), but it will be more than enough once rates rise, which again
seems like a reasonable «bet» for someone who still has a 10 - 20 +
year time horizon for long - term care and retirement needs (and over that time horizon, the client could have generated an amount equal to the hybrid life / LTC death benefit just with normal growth!).
And banks have added almost $ 100 billion of mortgage
bonds to their books this
year, Fed data show, and their demand doesn't
seem to be waning.