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Old 12-15-2008, 03:50 PM   #61
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If interest rates go up to 6%, you are still losing a lot of buying power in a 30-year treasury paying <3%, even if you hold it to term.

30 years of getting 3% on your principle instead of 6% is a massive hit.

Inflation is very likely to eat the people buying these bonds alive.

Unless you think the government will be restrained in their printing of money

Originally Posted by Architect View Post
Unless you hold them to term of course, then you can reinvest at higher coupon or some other investment.

If you stay away from bond funds, rising interest rates are great as they allow you to increase your growth and income, if you're a buy & hold bond investor.

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Old 12-15-2008, 06:51 PM   #62
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Originally Posted by Texarkandy View Post
I'm no financial wiz - but I don't think Treasuries issued for the TSP G-Fund are the same as others.

Perhaps someone more expert could enlighten me further as to the differences vis-a-vis fluctuating interest rates & inflation?
You are indeed correct. A very nice deal that only the fed govt can get. Long term rates while investing in short term securities, with no interest rate risk or risk of principal loss. Hopefully I can take advantage of it someday. If my I and S funds don't continue to dwindle down.

The G Fund offers the opportunity to earn rates of interest similar to
those of long-term Government securities but without any risk of loss
of principal and very little volatility of earnings.
• The objective of the G Fund is to maintain a higher return than inflation
without exposing the fund to risk of default or changes in market prices.
• The G Fund is invested in short-term U.S. Treasury securities specially
issued to the TSP. Payment of principal and interest is guaranteed by
the U.S. Government. Thus, there is no “credit risk.”
• The interest rate resets monthly and is based on the weighted average
yield of all outstanding Treasury notes and bonds with 4 or more years
to maturity.
• Earnings consist entirely of interest income on the securities.•
Interest on G Fund securities has, over time, outpaced inflation and
90-day T-bills.

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Old 12-17-2008, 03:41 PM   #63
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Originally Posted by eridanus View Post
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I like turtles.

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Old 12-17-2008, 07:41 PM   #64
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Originally Posted by Architect View Post
Unless you hold them to term of course, then you can reinvest at higher coupon or some other investment.
Weren't you touting the benefits of 30 year zeros? That's a long time to wait to reinvest. Not to mention a lot of potential inflation erosion to endure and massively ugly marks along the way.

And you might want to forget about the consumer. With all this free money were heading back to levered investing (already starting to see it ramp up again). Lots of juicy yields to arbitrage with those zero or near zero cost dollars the Fed is offering. It will start with high quality stuff (e.g. sell treasuries and buy government guaranteed debt pick ~200bp) but as those returns get arbed (or leveraged) away, it will move down in quality. It always does. I'll be stunned if investment grade corporate bonds don't outperform treasuries in 2009 by a wide margin . . . seems like a lock.

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