Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Re: Short Term vs. Intermd Term Bonds
Old 07-20-2006, 04:14 PM   #21
Full time employment: Posting here.
 
Join Date: Feb 2004
Location: Okanagan Valley
Posts: 805
Re: Short Term vs. Intermd Term Bonds

Quote:
Originally Posted by TromboneAl
I decided to move my short-term bond money to the total bond index fund, and did it today.* Note that the average duration of the total bond fund is 4.8 yrs vs. 5.9 for the intermediate bond fund.
What was the difference in current yield between total and intermediate if you have those numbers handy?
__________________

__________________
AltaRed is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: Short Term vs. Intermd Term Bonds
Old 07-20-2006, 04:28 PM   #22
Thinks s/he gets paid by the post
saluki9's Avatar
 
Join Date: Feb 2005
Posts: 2,032
Re: Short Term vs. Intermd Term Bonds

Quote:
Originally Posted by AltaRed
What was the difference in current yield between total and intermediate if you have those numbers handy?
Short Term Bond Index - Current yield 5.32% Duration 2.5

Total Bond Market Index - Current Yield 5.31% Duration 4.8

I will hold my comment on what I think of that trade
__________________

__________________
saluki9 is offline   Reply With Quote
Re: Short Term vs. Intermd Term Bonds
Old 07-20-2006, 04:30 PM   #23
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Re: Short Term vs. Intermd Term Bonds

Quote:
Originally Posted by saluki9
Short Term Bond Index - Current yield 5.32%

Total Bond Market Index - Current Yield 5.31%

I will hold my comment on what I think of that trade* *
Yeah, yeah. But the point isn't yield. Its total return.
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Re: Short Term vs. Intermd Term Bonds
Old 07-20-2006, 04:34 PM   #24
Thinks s/he gets paid by the post
wabmester's Avatar
 
Join Date: Dec 2003
Posts: 4,459
Re: Short Term vs. Intermd Term Bonds

Quote:
Originally Posted by brewer12345
Yeah, yeah.* But the point isn't yield.* Its total return.
In a rising rate environment? OMG!!!1!
__________________
wabmester is offline   Reply With Quote
Re: Short Term vs. Intermd Term Bonds
Old 07-20-2006, 04:38 PM   #25
Thinks s/he gets paid by the post
saluki9's Avatar
 
Join Date: Feb 2005
Posts: 2,032
Re: Short Term vs. Intermd Term Bonds

Quote:
Originally Posted by brewer12345
Yeah, yeah. But the point isn't yield. Its total return.
WARNING!!! OPINIONS FOLLOW:

In my professional experience, predicting future interest rates ranks somewhere between predicting winning lottery numbers and guessing how much congress is going to spend next year

In other words, I think it's a waste of time. Therefor my best estimate of future fixed income returns are the current yield. Henceforth taking almost twice the risk for the same return doesn't rank as a wise decision in my book.

OMG I was only able to keep my opinion to myself for 16 minutes


__________________
saluki9 is offline   Reply With Quote
Re: Short Term vs. Intermd Term Bonds
Old 07-20-2006, 04:41 PM   #26
Thinks s/he gets paid by the post
wabmester's Avatar
 
Join Date: Dec 2003
Posts: 4,459
Re: Short Term vs. Intermd Term Bonds

Hey, bond guys.* What's your opinion of TIPS vs nominal bonds right now?* *Seems like a no-brainer to me.* *Even the 5-year TIPS seems to have a large premium over nominals, and I really don't understand why.* *The embedded inflation estimate has been low for 2 years now.* *Does the market expect inflation to go to zero over the next 3 years?
__________________
wabmester is offline   Reply With Quote
Re: Short Term vs. Intermd Term Bonds
Old 07-20-2006, 04:53 PM   #27
Thinks s/he gets paid by the post
saluki9's Avatar
 
Join Date: Feb 2005
Posts: 2,032
Re: Short Term vs. Intermd Term Bonds

Quote:
Originally Posted by wab
Hey, bond guys. What's your opinion of TIPS vs nominal bonds right now? Seems like a no-brainer to me. Even the 5-year TIPS seems to have a large premium over nominals, and I really don't understand why. The embedded inflation estimate has been low for 2 years now. Does the market expect inflation to go to zero over the next 3 years?
You might see that estimate of future inflation moderate even more in the near future as we've seen growth slowing a little bit

On the 6 month bills i'm showing an estimated CPI of 2.588% and it narrowing to 2.34% on the 5 year.

2.34 isn't zero, but it's heading in that direction

Also, please read my comment above about predicting interest rates

__________________
saluki9 is offline   Reply With Quote
Re: Short Term vs. Intermd Term Bonds
Old 07-20-2006, 04:59 PM   #28
Thinks s/he gets paid by the post
wabmester's Avatar
 
Join Date: Dec 2003
Posts: 4,459
Re: Short Term vs. Intermd Term Bonds

Quote:
Originally Posted by saluki9
On the 6 month bills i'm showing an estimated CPI of 2.588% and it narrowing to 2.34% on the 5 year.*
Right, but the market has been making that same prediction now for a couple years.* *Even when inflation has been in the 4%+ range.* *That's what I don't get. I figure the past prediction will only be true if future inflation is way lower than the current prediction.
__________________
wabmester is offline   Reply With Quote
Re: Short Term vs. Intermd Term Bonds
Old 07-20-2006, 05:26 PM   #29
Recycles dryer sheets
IBWino's Avatar
 
Join Date: May 2006
Posts: 423
Re: Short Term vs. Intermd Term Bonds

Quote:
Originally Posted by AltaRed
What was the difference in current yield between total and intermediate if you have those numbers handy?
Short Term Bond Index - Current yield 5.32% Duration 2.5 Avg Return (10 yr) 5.09%

Intermediate Term Bond Index - Current yield 5.57%* Duration 5.9* Avg Return (10 yr) 6.41%

Total Bond Market Index - Current Yield 5.31% Duration 4.8 Avg Return (10 yr) 5.93%
__________________
IBWino is offline   Reply With Quote
Re: Short Term vs. Intermd Term Bonds
Old 07-20-2006, 08:45 PM   #30
Full time employment: Posting here.
 
Join Date: Oct 2003
Posts: 961
Re: Short Term vs. Intermd Term Bonds

Quote:
Originally Posted by saluki9
WARNING!!! OPINIONS FOLLOW:

In my professional experience, predicting future interest rates ranks somewhere between predicting winning lottery numbers and guessing how much congress is going to spend next year

In other words, I think it's a waste of time. Therefor my best estimate of future fixed income returns are the current yield. Henceforth taking almost twice the risk for the same return doesn't rank as a wise decision in my book.

OMG I was only able to keep my opinion to myself for 16 minutes


I definitely agree that it's a waste of time to predict interest rates.

However, I don't think that the intermediate term bonds are necessarily twice the risk. I think it depends on an investors time horizon.

For example, for investors who need the money next week, ST bonds, Tbills, or MM funds are definitely "less risky" than IT and LT bonds. However, for someone who is investing for money need [read: liabilities] 5, 10, 20, or 30 years in the future, Longer Term bonds are "less risky" than ST bonds, Tbills, or MM funds. Hence, insurance companies use LT bonds to match liabilities. We can also do the same. For our real LT liabilities, we can use LT TIPS, and for LT nominal liabilities we can use LT nominal bonds.

- Alec
__________________
ats5g is offline   Reply With Quote
Re: Short Term vs. Intermd Term Bonds
Old 07-21-2006, 06:59 AM   #31
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Re: Short Term vs. Intermd Term Bonds

Quote:
Originally Posted by wab
In a rising rate environment?* *OMG!!!1!*
Umm, check the longer end of the curve (5 to 30 years) over the past few months. It is down.

FWIW, I think the TBM Index is likely to be a better choice for a portfolio that includes equities and some commodities exposure. Why? you get closer to the efficient frontier. If rates move up, commodities are likely doing well and stocks may be, while bonds are falling. If rates are flat, commodities , stocks likely up, bonds flat. If rates fall, commodities down, stocks , bonds up. But you don't get these offsetting less-than-perfectly correlated moves with short paper, only medium and long term bonds.
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Re: Short Term vs. Intermd Term Bonds
Old 07-21-2006, 07:19 AM   #32
Thinks s/he gets paid by the post
 
Join Date: Aug 2005
Posts: 1,375
Re: Short Term vs. Intermd Term Bonds

For those who still wonder why the average bloke sits quivering in a corner instead of managing their portfoilio, it's the conflicting and confusing advice...slice & dice (and which flavor?) VS slice & dice is "dead" VS value/small cap/foreign is the thing VS now it's time for growth or Dow or dogs of the DOw or CANSLIM or technical analysis VS the current hot newsletter OR last year's hot newsletter OR the best newletter over the past 3/5/10/15 years VS Jim Cramer or Jim Jubak or some other Jim VS Ben Stein this month OR Ben Stein last month VS trust my broker VS it's a stockpicker's market VS move to cash or commodities or real estate or oh-my-gog-get-out-of-real-estate-NOW! VS pssst Wellesley or Lifestrategy or Target Retirement or Dodge & Cox or Vanguard or Fidelity...get short-term bonds/intermediate bonds/individual bonds/TIPS/I-Bonds/MM accounts or funds/CD ladders...it's time to get out VS time to get in. And if you change your mind in a taxable account, there's taxes to worry about. And you're stupid and will be eating cat food if you get it wrong...so just buy a new truck and a big screen TV with surround sound and have faith in the future, it's happy hour in America!
__________________
You can't always get what you want, but if you try sometimes, you might find you get what you need.
astromeria is offline   Reply With Quote
Re: Short Term vs. Intermd Term Bonds
Old 07-21-2006, 07:26 AM   #33
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2003
Location: Kansas City
Posts: 7,408
Re: Short Term vs. Intermd Term Bonds

Hmmm

And people wonder why Bogle sometimes comes across as a grumpy old man - toiling in the wilderness.

heh heh heh heh heh heh heh - So what's new out there other than PCRIX to counterbalance my TBM and MM?
__________________
unclemick is offline   Reply With Quote
Re: Short Term vs. Intermd Term Bonds
Old 07-21-2006, 07:28 AM   #34
Moderator Emeritus
Rich_by_the_Bay's Avatar
 
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
Re: Short Term vs. Intermd Term Bonds

Quote:
Originally Posted by astromeria
For those who still wonder why the average bloke sits quivering in a corner instead of managing their portfoilio

That is one of the funnier posts I've read in a long time. You outta write a column.
__________________
Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.

As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
Rich_by_the_Bay is offline   Reply With Quote
Re: Short Term vs. Intermd Term Bonds
Old 07-21-2006, 07:41 AM   #35
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Re: Short Term vs. Intermd Term Bonds

Quote:
Originally Posted by unclemick2
Hmmm

And people wonder why Bogle sometimes comes across as a grumpy old man - toiling in the wilderness.

heh heh heh heh heh heh heh - So what's new out there other than PCRIX to counterbalance my TBM and MM?
DJP as an alternative to PCRIX, for one thing. I also like a slug of high grade, non-USD bonds.
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Re: Short Term vs. Intermd Term Bonds
Old 07-21-2006, 08:58 AM   #36
Thinks s/he gets paid by the post
saluki9's Avatar
 
Join Date: Feb 2005
Posts: 2,032
Re: Short Term vs. Intermd Term Bonds

Quote:
Originally Posted by ats5g


For example, for investors who need the money next week, ST bonds, Tbills, or MM funds are definitely "less risky" than IT and LT bonds. However, for someone who is investing for money need [read: liabilities] 5, 10, 20, or 30 years in the future, Longer Term bonds are "less risky" than ST bonds, Tbills, or MM funds. Hence, insurance companies use LT bonds to match liabilities. We can also do the same. For our real LT liabilities, we can use LT TIPS, and for LT nominal liabilities we can use LT nominal bonds.

- Alec
What you have said is correct for pension funds and insurance companies. However, this discussion is concerning bond funds. If you have the capital, you certainly can immunize your FIRE portfolio simply by buying zero coupon long bonds and waiting out the peaks and valleys. However, you will not accomplish the same thing buying a long bond fund becuase unlike your portfolio of actual bonds the maturity and duration of the fund will stay the same over time. In addition, most funds aren't just buy and hold, so the safety you get by holding the bonds to maturity also will not be realized.

__________________

__________________
saluki9 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Short term money MRGALT2U FIRE and Money 37 06-07-2005 10:01 PM
Ladder vs Short Term Bond Fund WilliamG FIRE and Money 10 03-12-2005 04:25 AM
EE bonds to ??? cute fuzzy bunny FIRE and Money 1 12-24-2003 01:33 PM
The Scoop on High Yield Bonds Ted FIRE and Money 9 12-04-2003 01:03 PM
short term bond funds DFW_M5 FIRE and Money 4 09-30-2003 06:35 PM

 

 
All times are GMT -6. The time now is 09:11 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.