Is now a good time to invest in Treasuries?

[petestan]

I am looking to make some changes to the bond portion of my portfolio and needed some feedback. Presently own DBLTX Doubleline Total Return I which is mostly in mortgages, VICSX Vanguard Intermediate Term Corporate, I Bonds and a small amount in an emerging market bond fund.
I was thinking of adding Treasuries and looking at VFIUX Vanguard Intermediate Term Treasury.

What do you think? Other options?

Thank you.

 

[gcgang]

I ask myself the same thing.

When I started investing 30 years ago, I bought zero coupon Treasuries at 14%. Today they're 1-3%. Doesn't seem like a good time.

Yet times change. I don't have much in long term bonds, so established a small position in Vanguard Long Term Treasury zero fund, EDV I think, and it has served its purpose of diversification, holding its value when stocks go down, most of the time.

I should be receiving a hunk of cash from the sale of our house and am thinking about intermediate TIPs, but hesitate due to tax treatment more than investment reservations.

Overall, as usual, it depends on what you need. I just want something that will hold its value, or at least erode purchasing power slowly, so will probably buy some sort of intermediate term Treasury fund in the near future.

 

[DrRoy]

There is never a guarantee that now is the right time to buy any particular investment. Bonds in general have had a historic 30+ year bull market, and it is general wisdom that interest rates are due to rise, so bond values would fall. That being said, bonds have been OK for longer than general wisdom predicted several years ago. I do buy bonds, but I buy individual issues, rather than funds, so that I will get back to full principle at maturity.

 

[targatom2019]

I have been buying individual muni. bonds with average coupon rate around 4.5% not to exceed maturity year of 2040 or at the age of 69. All of my individual muni bonds are A to AA rated and have to be insured.

 

[pb4uski]

I recall a few years ago that Warren Buffet said that he wasn't investing in Treasuries because the return was not worth the risk... he called it "return-free risk" (I suspect he was talking about interest rate risk). I agree and prefer corporates instead. I have been investing my bond allocation in Guggenheim Bulletshare Corporate and IBond Corporate 2020 target maturity bond funds.

 

[Gone4Good]

I was thinking of adding Treasuries and looking at VFIUX Vanguard Intermediate Term Treasury.

What do you think? Other options?

VFIUX has an average maturity of 5.7 years and a 1.36% yield.

Ally 5-yr CDs currently yield 2%.

Unless you're betting on declining interest rates, I'm not sure why a retail investor would choose intermediate treasury bonds over bank CDs right now.

 

[ETFs_Rule]

Younger than 30 - No reason to own bonds
In your 30's - 10% - 20% bonds
In your 40's - 20% - 30% bonds
In your 50's - 30% - 40% bonds
60 to retirement - 40% - 50% bonds


Buy a total bond market index fund and a total stock market index fund.

 

[target2019]

I am looking to make some changes to the bond portion of my portfolio and needed some feedback. Presently own DBLTX Doubleline Total Return I which is mostly in mortgages, VICSX Vanguard Intermediate Term Corporate, I Bonds and a small amount in an emerging market bond fund.
I was thinking of adding Treasuries and looking at VFIUX Vanguard Intermediate Term Treasury.

What do you think? Other options?

Thank you.

Do you still have the same portfolio referenced here:

http://www.early-retirement.org/for...e-from-portfolio-and-need-advice-79587-2.html

Maybe shoot for 5% in your state tax-exempt fund?

If your portfolio has changed since the other thread ended, it might help if you post the percentages.

 

[mathjak107]

VFIUX has an average maturity of 5.7 years and a 1.36% yield.

Ally 5-yr CDs currently yield 2%.

Unless you're betting on declining interest rates, I'm not sure why a retail investor would choose intermediate treasury bonds over bank CDs right now.

while today a 5 year cd yields a bit more then a total bond fund , the total bond fund is always replacing bonds with higher yielding ones as new bonds are bought. yes the nav falls but eventually the higher increases in interest pull you a head .reinvested interest gets the higher yields as well , 5 year cd's do not. interest is at the original rate , not so good when rates are rising .

in the case of a corporate bond fund you have the above plus as the rates go up and the economy gets stronger ,credit upgrades can add more value to a total bond fund .

while all the positives of a total bond fund over a 5 year cd work with you when rates go up , they work against you when rates go down .

 

[Gone4Good]

while today a 5 year cd yields a bit more then a total bond fund , the total bond fund is always replacing bonds with higher yielding ones as new bonds are bought. yes the nav falls but eventually the higher increases in interest pull you a head .reinvested interest gets the higher yields as well , 5 year cd's do not. interest is at the original rate , not so good when rates are rising .

But I can replicate all of that with a CD ladder if I want. I can also have coupons sent to me instead of reinvested at the CDs fixed rate, if I want. So I'm still not sure how investing in a fund that holds lower yielding treasury securities comes out ahead of CDs that yield more.

And if you're concerned about rising rates, CD's still can't be beat. At Ally, I can break a 5-year CD at a cost of just 5 month's interest, which approximates a duration of much less than one year.

So with a 5-yr CD I'm taking treasury default risk, getting the yield equivalent of a 13 year treasury bond, all while taking the interest rate risk of a treasury bill.

Corporates, meanwhile, are apples to CD oranges. Taking credit risk can be a good thing, or not. Either way the OP asked about investing in an intermediate treasury fund, which is what I addressed my comment to.

 

[Senator]

Ally 5-yr CDs currently yield 2%.

With the S&P dividend yield being 2%+, and it is very unlikely to have a 5+ year flat period when you include dividends, why not the S&P?

I know it goes against the diversification plan of many, except Warren Buffet, but you also have a huge chance for growth.

Just my .02...

 

[Gone4Good]

With the S&P dividend yield being 2%+, and it is very unlikely to have a 5+ year flat period when you include dividends, why not the S&P?

Because the risk profile is substantially different between the two.

And because "unlikely to have a 5+ year flat period" also includes the possibility of a 50% decline over 5 years. So for money that I want to protect, for whatever reason, the S&P is not a good substitute for treasury backed securities.

 

[phil1ben]

I have been buying individual muni. bonds with average coupon rate around 4.5% not to exceed maturity year of 2040 or at the age of 69. All of my individual muni bonds are A to AA rated and have to be insured.

I have also been buying individual munis for the past 15 years. I do not buy mutual funds. I used to buy through Fidelity and closed my account and moved to Schwab about 2 years ago. How have you been finding the yield to maturity and yield to call. To me those are more important issues than the coupon rate. I have been buying 2020-2035 and on the longer end I am at best seeing YTM of 3.8 and of course a lower yield to call. The above assumes no purchases in Chicago, PR, and Rhode Island. Also it is difficult to get AA rated insured bonds with such a high YTM so I often will buy A or A+. I do have Illinois State GO Bonds which do not have the chapter 9 risk.

 

[VFK57]

I think that this is a great analyses on US Debt and decision making to buy Treasuries or not:
Forbes Welcome

 

[ejman]

I think that this is a great analyses on US Debt and decision making to buy Treasuries or not:
Forbes Welcome

Interesting analysis in that article. I guess the massive reduction in taxes during the 1980-1988 and 2000-2008 periods had nothing to do with increased deficits during those periods and afterwards?

 

[YeahNo]

VFIUX has an average maturity of 5.7 years and a 1.36% yield.

Ally 5-yr CDs currently yield 2%.

Unless you're betting on declining interest rates, I'm not sure why a retail investor would choose intermediate treasury bonds over bank CDs right now.

Where do you see 2%? I went to their site and only see 1.3% as their best rate if you put in at least $25k.

 

[Gone4Good]

Where do you see 2%? I went to their site and only see 1.3% as their best rate if you put in at least $25k.

That's the 18 month rate. You have to click over to 5-year.

 

[gerntz]

Younger than 30 - No reason to own bonds
In your 30's - 10% - 20% bonds
In your 40's - 20% - 30% bonds
In your 50's - 30% - 40% bonds
60 to retirement - 40% - 50% bonds


Buy a total bond market index fund and a total stock market index fund.

Retirement to 70: 40% bonds
70-75: 30 %
75-80: 20%
80-90: 10%
90+: No reason to own bonds

 

[gerntz]

i recall a few years ago that warren buffet said that he wasn't investing in treasuries because the return was not worth the risk... He called it "return-free risk" (i suspect he was talking about interest rate risk). I agree and prefer corporates instead.

bingo!!

 

[gerntz]

Interesting analysis in that article. I guess the massive reduction in taxes during the 1980-1988 and 2000-2008 periods had nothing to do with increased deficits during those periods and afterwards?

Government Revenue increased from 517B to 909B 1980-88 & from 2.0T to 2.5T 2000-08. So no, tax cuts had zero to do with increased deficits in those periods.

 

[YeahNo]

That's the 18 month rate. You have to click over to 5-year.

Perfect, thanks!

 

[VFK57]

Where do you see 2%? I went to their site and only see 1.3% as their best rate if you put in at least $25k.

If you are looking for 5 years CD, the CIT Bank has the highest APY at 2.2%.
Around Feb 2016 they had it at 2.25% but most rates went a bit down during March.

 

[Gone4Good]

Government Revenue increased from 517B to 909B 1980-88 & from 2.0T to 2.5T 2000-08. So no, tax cuts had zero to do with increased deficits in those periods.

You do realize that both receipts and outlays grow along with population growth and also with inflation, right?

As a % of GDP revenues declined from 18.5% in 1980 to 17.6% in 1988, and from 20% in 2000 to 17.6% in 2008.