Montecfo
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Yep. Today's benign CPI readings are making those yields we have been locking all year look even better.
Anybody thinking about treasuries right now?
Now that many Agency bonds will be getting called, does anyone know how to get notified when a bond in your brokerage is going to be called (e.g., 5 day notice of bond being called).
I’m seeing agency bonds trading at YTM of 6.4% and below. Therefore, the 6.58%, 6.55%, and maybe even the 6.375% that I own will be called by mid-2024 (probably sooner). My Vanguard account doesn’t alert me to bond calls. Instead, I login and see unexpected cash in my settlement account.
Now that many Agency bonds will be getting called, does anyone know how to get notified when a bond in your brokerage is going to be called (e.g., 5 day notice of bond being called).
I’m seeing agency bonds trading at YTM of 6.4% and below. Therefore, the 6.58%, 6.55%, and maybe even the 6.375% that I own will be called by mid-2024 (probably sooner). My Vanguard account doesn’t alert me to bond calls. Instead, I login and see unexpected cash in my settlement account.
Especially if one failed to dump their bond funds when interest rates started to climb higher.
I know that's market timing but it's also understanding the characteristics of bonds and bond funds.
Riding the interest rate decline down to zero (blaming you, FED) was fun for bond and bond fund holders, but now, there won't be the same kind of fun as rates rise.
If someone is still in bond funds, could they sell a portion (or all of the bond fund) and replace it with individual bonds selected from the fund with similar duration and credit risk? Then these bonds could be held to maturity.
Looking at the list of assets held, disclosed by the fund, is a convenient place to start the search.
I have been experimenting with this strategy to partly diversify my BulletShare target maturity etf ladder.
-gauss
Why are you wanting to diversity? Why not use bulletshares if you like that product?
The answer to your question is of course you can. You can also just searching with your broker using their tools.
Thanks Montecfo,
The Bulletshares monthly dividend slowly decreased over a 2 year period to about 50% of what it was when I purchased. The income then recovered to the original level.
I wasn't expecting this for a Target Maturity Fund.
-gauss
I'm trying to model the future income and value of a bond ETF fund, such as VCIT. While I understand the distributions and ETF value can go up and down with interest rates, I still need to understand just roughly what income it might produce and what value it will be, if interest rates stayed unchanged.
This is what the 30 day SEC yield is for. If interest rates were to not change, the SEC yield is what you can expect for the next <duration> years, on average.
I'm trying to model the future income and value of a bond ETF fund, such as VCIT. While I understand the distributions and ETF value can go up and down with interest rates, I still need to understand just roughly what income it might produce and what value it will be, if interest rates stayed unchanged.
For example, distributions today are below the bond fund's Average Yield to Maturity, so distributions should continue to rise over time for quite a while unless or until interest rates reverse.
For a bond ETF, liek VCIT, we have the following information available:
Current Price - example $77.54
Current Projected ETF Yield to Maturity - example 6.4%
Current Average Years to Maturity - example 7.5 years
Current Average COupon Rate - example 3.9%
Current Average Distribution Rate - example 4.27%
Number of Distributions Per Year - example 12
Number of Periods Until the Maturity Date - example 91 distributions
Is there an excel formula that would give me a projected value of the ETF at the "mythical" maturity date (at this point in time)? I created a formula that estimated it, but it seems to be slightly off. I wonder if there is something out there that is more accurate.
I understand. I'm trying to project the future value of the ETF, not the yield.
I understand. I'm trying to project the future value of the ETF, not the yield.
If rates don't change, the NAV shouldn't change either.
There should be some NAV appreciation as bonds in the fund age and mature, since coupons/distributions are lower than the yield.If rates don't change, the NAV shouldn't change either.
Incorrect. The net asset value of the fund is the sum of the value mirroring the dynamic nature of the underlying pool of bonds and reflects management fees, defaults, owner redemptions, manger sales, purchases and more importantly the rise or fall in value, depending on the coupon, of the individual bonds as they approach par.
There should be some NAV appreciation as bonds in the fund age and mature, since coupons/distributions are lower than the yield.
I should have said the NAV won't change significantly, which I stand by.
As always, bond funds should be purchased for their future dividends, not because of any predicted change in the NAV.
It could change significantly, just look at the recent past. As rates rose, people took major hits in NAV.
The NAV will continue to change as the underlying bonds get repriced every market day as they near par and are replaced with new bonds. Redemptions, management fees, defaults will also alter the NAV.This entire sub-thread was based on the scenario where rates don't change.
Quote:
Originally Posted by Echard View Post
I'm trying to model the future income and value of a bond ETF fund, such as VCIT. While I understand the distributions and ETF value can go up and down with interest rates, I still need to understand just roughly what income it might produce and what value it will be, if interest rates stayed unchanged.
Bond funds are on my top 3 list of things people invest in that they don't fully understand. The other two are leveraged ETFs and crypto.