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Old 12-16-2016, 04:15 AM   #61
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Interesting as it is hard to get such data unless one owns the fund and watches the strategy of some years. Did the reduction in LT bonds affect average duration?
I get it off morningstar
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Old 12-16-2016, 08:43 AM   #62
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If the 10 year Treasury makes it to 3% by Jan 1, I will feel like next year's rate rises are well baked in. The 10 year crossed 2.6% yesterday before pulling back slightly, so it's well on its way. The 5 year similarly crossed 2.1% yesterday, the highest rate in five years!

We could get a recession next year, or the next, you never know. Recessions push intermediate and long rates back down, even if the Fed doesn't do anything on the short end.
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Old 12-16-2016, 09:29 AM   #63
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I get it off morningstar
I meant it is hard to see a fund's bond strategy over a period of years without following it. For the current fund stats M* is good or the VG site.
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Old 12-16-2016, 09:38 AM   #64
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If the 10 year Treasury makes it to 3% by Jan 1, I will feel like next year's rate rises are well baked in. The 10 year crossed 2.6% yesterday before pulling back slightly, so it's well on its way. The 5 year similarly crossed 2.1% yesterday, the highest rate in five years!

We could get a recession next year, or the next, you never know. Recessions push intermediate and long rates back down, even if the Fed doesn't do anything on the short end.
Apparently the best bet is that today's yield curve is the best future predictor we have. If that is true, then the 11 year yield today is what we should expect for the 10 year yield a year from now. So interperlating off the 10yr and 20 yr yields we would get 2.60% + .09 = 2.7% for next year's 10yr Treasury. But take that with a grain of salt.
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Old 12-16-2016, 09:45 AM   #65
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Apparently the best bet is that today's yield curve is the best future predictor we have. If that is true, then the 11 year yield today is what we should expect for the 10 year yield a year from now. So interperlating off the 10yr and 20 yr yields we would get 2.60% + .09 = 2.7% for next year's 10yr Treasury. But take that with a grain of salt.
It's still adjusting though. Have to let it settle down.

Anyway, I feel much better about rebalancing at these levels compared to those on Nov 1. If the 10 year makes it to 3%, and the 5 year to 2.25%, I'll feel like maybe they overshot a little, so even better.

Interestingly, I find that interest rates tend to rise as the year end approaches. Just like stocks typically have a Santa Claus rally. This makes early Jan rebalancing good from a timing perspective.
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Old 12-16-2016, 10:38 AM   #66
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Interestingly, I find that interest rates tend to rise as the year end approaches. Just like stocks typically have a Santa Claus rally. This makes early Jan rebalancing good from a timing perspective.
From time to time I check the real Treasury rates (TIPS) here: https://www.treasury.gov/resource-ce...data=realyield

Right now the 5 year rate is 0.32% ... actually positive for a change. A few years back I see:
12/16/15 0.55%
12/24/14 0.50%
12/30/13 0.07%

So at least in recent years late December has given us relatively higher rates.

I was tempted to buy 5 year TIPS (held to maturity) last December but did not. But now that I look back at the fund I held instead, VFIDX (intermediate investment grade), for the 12 months it has returned 2.89%. The inflation has been about 1.6% I think. So better then the TIPS I could have bought even with the recent bond selloff.
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Old 12-16-2016, 10:55 AM   #67
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From time to time I check the real Treasury rates (TIPS) here: https://www.treasury.gov/resource-ce...data=realyield

Right now the 5 year rate is 0.32% ... actually positive for a change. A few years back I see:
12/16/15 0.55%
12/24/14 0.50%
12/30/13 0.07%

So at least in recent years late December has given us relatively higher rates.

I was tempted to buy 5 year TIPS (held to maturity) last December but did not. But now that I look back at the fund I held instead, VFIDX (intermediate investment grade), for the 12 months it has returned 2.89%. The inflation has been about 1.6% I think. So better then the TIPS I could have bought even with the recent bond selloff.
I notice that the Fidelity Inflation Protected Bond Premium class FSIYX with duration of 5.73 years is quoting 30 day yield of 2.21%. It was 2.78% on 11/30/16.

I don't invest directly in TIPs, so I'm not that familiar. To me TIPs provide a reading on expected inflation. And apparently you can invest after the fact and do better, rather than buying ahead of any rise in inflation.
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Old 12-16-2016, 11:30 AM   #68
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As a benchmark, the 5 year nominal bonds (I think this is Treasuries) had a historical real return of 2.3% from 1926-2010 (per Swedroe). So I'd want a pretty decent number before going with TIPS. Maybe between 1% and 2%.

Regarding funds, the Vanguard VIPSX (inflation protected, 8.6 years average maturity) has a quoted SEC yield of -0.1% now. Bummer, but that's the current bond market we are looking at.
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Old 01-01-2017, 01:39 PM   #69
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I'm very late to this party, but having expected interest rate to go up (eventually), 3 years ago I allocated about 20% of bonds to Floating Rate fund--but like stocks the fund should get wacked severely in a recession. It paid off this year, so I expect it's probably late to come to the party, unless interest rates/inflation start cooking.
I sold the TIPS fund a couple years ago when it went highly negative yield, but I may start to nibble back to cut my overly high cash allocation.
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