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How low will bonds go?
Old 06-22-2006, 08:20 PM   #1
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How low will bonds go?

The last two weeks have just been brutal to my bond funds (not that my equities have done much better, but I expect some volatility from them). Is it time to buy? Or are prices going to continue to crater? It's supremely irritating to watch the "stable" portion of my portfolio head into the dumpster.
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Re: How low will bonds go?
Old 06-22-2006, 08:28 PM   #2
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Re: How low will bonds go?

I was looking at our portfolio a couple weeks ago and thinking "Holy cow, that's a year's salary!"

Then I remembered: My salary is ZERO. Volatility is meaningless if you're not selling.

Quote:
Originally Posted by soupcxan
Is it time to buy?
Not for me.

I remember buying with both hands in June 2002, only to encounter July 2002.* And then we got another head-fake in October!

In six months we're all gonna look back on this summer as classic seasonality.*

Having said that, if Intel dips below $17 then I don't care what day it is.* And emerging markets are gonna test everyone's patience again, too.
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Re: How low will bonds go?
Old 06-22-2006, 09:20 PM   #3
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Re: How low will bonds go?

IBond is a good buy if you can hold it for a year or more. The fix portion is 1.5% and the inflation adjusted portion may go as high as 5.5%. The total yield may be as high as 7%.
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Re: How low will bonds go?
Old 06-22-2006, 09:50 PM   #4
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Re: How low will bonds go?

IMHO, nords has the right idea here. Just maintain your target asset allocation and try to disconnect from the ups and downs of the market. You'll make more money in the long run and have far less stress.
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Re: How low will bonds go?
Old 06-23-2006, 08:16 AM   #5
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Re: How low will bonds go?

Its all about what you think rates will do. The long end of the curve seems to move up a few weeks before the Fed raises short rates so that inversion between Fed Funds and the 10 year either doesn't happen or stays small. So I think this is about when the Fed stops raising rates. I personally believe that the Fed will over-do it and push the economy into a brown-out/recession. When that happens, they will be cutting rates and long bonds could see some nice appreciation. But the game is to figure out when they will stop raising rates. Place your bets... But keep in mind that in all likelihood bonds will go staright up when the Fed pauses.

BTW, I think ISM or OSM (exchange traded bonds) are a FAR better deal than I-bonds.
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Re: How low will bonds go?
Old 06-23-2006, 08:41 AM   #6
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Re: How low will bonds go?

I'm from the camp that stays really simple with my FI.

I avoid credit risk and keep my duration around 2-3 at most.

Predicting the direction of interest rates is probably the most often attempted and most often failed endeavor in finance. (well, maybe second behind active equity mgmt but that's another thread)

If I'm going to take that kind of risk, I might as well have buy something with unlimited upside.
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Re: How low will bonds go?
Old 06-23-2006, 09:21 AM   #7
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Re: How low will bonds go?

Quote:
When that happens ... long bonds could see some nice appreciation
... or not ...
Quote:
Predicting the direction of interest rates is probably the most often attempted and most often failed endeavor
... followed closely by Fx
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