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03-10-2006, 09:37 AM
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#1
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Thinks s/he gets paid by the post
Join Date: Jul 2003
Location: Pasadena CA
Posts: 3,206
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A Bear Market In Bonds
http://tinyurl.com/fyn6r
In the USA Today they actually had an interesting article about bonds in a bear market.
I particularly liked the image:
"A bear market in stocks is like being stepped on by an elephant. A bear market in bonds, though, is like being bitten by a poodle — for a decade."
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T.S. Eliot:
Old men ought to be explorers
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Re: A Bear Market In Bonds
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03-10-2006, 10:20 AM
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#2
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,702
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Re: A Bear Market In Bonds
Thats a good one.
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Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
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Re: A Bear Market In Bonds
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03-10-2006, 06:36 PM
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#3
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Sep 2005
Posts: 5,381
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Re: A Bear Market In Bonds
I think the article erroneously focuses on the market price of the bond. If you're reinvesting coupons and holding to maturity, your total return from fixed income investments over the life of the bond will actually be higher in a "bear" market scenario and lower in a "bull" market.
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Retired early, traveling perpetually.
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Re: A Bear Market In Bonds
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03-10-2006, 07:44 PM
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#4
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Give me a museum and I'll fill it. (Picasso)
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Join Date: Mar 2003
Posts: 18,085
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Re: A Bear Market In Bonds
Good point, 3 Yrs. Plus, if one invests in bonds that offer a potential capital gain as well as yield, the direction of interest rates makes a lot less of a difference.
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"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
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Re: A Bear Market In Bonds
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03-10-2006, 07:47 PM
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#5
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 34,665
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Re: A Bear Market In Bonds
Hey, I'm looking forward to BUYING bonds again. They're finally getting cheaper.
4.75% - is it a bear market in bonds? Well I don't know, but I'd swear 3% to 4.75% WAS.
Audrey
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Retired since summer 1999.
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Re: A Bear Market In Bonds
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03-10-2006, 07:51 PM
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#6
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
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Re: A Bear Market In Bonds
audrey, I am tip-toeing into some junk issues at the moment. Once we see the 10 year treasury over 5%, I will be watching very carefully because there will likely be an opprtunity for capital gains at some point.
__________________
"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
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Re: A Bear Market In Bonds
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03-11-2006, 04:06 AM
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#7
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Recycles dryer sheets
Join Date: May 2005
Posts: 228
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Re: A Bear Market In Bonds
The article did not discuss bonds per se, but bond funds and clearly indicated that the discussion did not apply to those holding (individual) bonds to maturity. I found the paper rather clear though not offering solutions to the problem addressed (i.e. generating income) and curiously enough did not mention TIPS as a class of relevant assets.
If one manages to make money holding bond funds (LONG) in an environment where rates are rising, let me know, I'll be interested !!!. One way I think of (for individuals with low fees access to the product and good liquidity) is going SHORT an ETF which replicates the performance of an index of bond funds, for example the EuroMTS 10-15YTM (Ex CNO-Etrix) which is one such index (with associated ETF) for the Euro zone. There must exists the equivalent in the US which I do not know.
Any other idea ?
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gnoti seauton
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