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Old 08-22-2011, 11:35 AM   #21
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When I look at 10 year charts, I don't see bond funds losing money.
...
You will not get a good picture of bond returns without looking at a much longer stretch. In the 1950 - 1980 period rates went up in general. See here for a picture: 10-Year Treasury Constant Maturity Rate (GS10) - FRED - St. Louis Fed

Returns are composed of yield plus rate change. If you are just looking at total returns you must realize which direction rates went at the begin and end of that period.

As other have said rates are incredibly low now, back to Eisenhower era rates. Do not expect the past 10 year returns going forward for the next 10 years.

P.S. Oops -- just noticed this is a pretty old thread.
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Old 08-22-2011, 12:42 PM   #22
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Old thread or not, you bring up a good point and something that worries many of us - The Historically Low Interest Rates. I have not purchased new bonds of any sort for several years. In fact, I recently sold some GNMA fund shares because I thought they can't go up much more. Of course, then the Fed announced low rates for the next two years, so I probably jumped the gun.
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Old 08-22-2011, 01:16 PM   #23
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Old thread or not, you bring up a good point and something that worries many of us - The Historically Low Interest Rates. I have not purchased new bonds of any sort for several years. In fact, I recently sold some GNMA fund shares because I thought they can't go up much more. Of course, then the Fed announced low rates for the next two years, so I probably jumped the gun.
Larry Swedroe has a new article on GNMA's here: GNMAs: You Can Do Better - CBS MoneyWatch.com

Haven't read it myself yet.
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Old 08-23-2011, 11:50 PM   #24
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Larry Swedroe has a new article on GNMA's here: GNMAs: You Can Do Better - CBS MoneyWatch.com

Haven't read it myself yet.
While Larry is probably right that intermediate treasury outperformed GNMA. What he didn't point out was that GNMA outperformed that benchmark bond fund (at least in this forum) Vanguard Total bond market. I believe (it's been a while since I ran the numbers) that GNMA's actually had less risk also.

The problem is like so many other things "past performance does not equal future success." Over the last decade+ we've seen very easy credit, over the last 3 years we've seen a remarkable rush to safety. So it is not at all surprising that "safest" bonds have been the best performing, nor that the almost as safe GNMA bonds would be the next best performing bond.

However, I and more importantly many bond experts like Bill Gross expect that the next 5-10 years will not be at all kind to Treasuries.

He raises good points but about the likely behavior of GNMA (i.e. pretty bad during rising interest rates due to people not refinancing cheap mortgages) although I don't think they did that bad in the late 70s and early 80s.
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Old 08-24-2011, 09:18 AM   #25
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However, I and more importantly many bond experts like Bill Gross expect that the next 5-10 years will not be at all kind to Treasuries.

He raises good points but about the likely behavior of GNMA (i.e. pretty bad during rising interest rates due to people not refinancing cheap mortgages) although I don't think they did that bad in the late 70s and early 80s.
Yes, adjusting to change is a difficult act to perform in investing. Years ago I made lot's of $'s in Fannie and Freddie, now they're not even listed as stocks.

I've got a big chunk of our bond portfolio invested with Gross. He has not been right on the Treasuries short term but I expect that PTTRX will do better over time. A similar Treasury outperformance occured in 2008 -- flight to safety isn't permanent unless this is Armageddon.
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