Bond Fund Question- Treasuries vs Total Bond

[RetMD21]

tSorry if this has been asked before. I noticed that the an intermediate term treasury is down less year to date than the total bond market or non-treasury intermediate bond funds, Is this just due to the shorter effective duration or is it some sort of "flight to quality?" I have read that treasuries may have lower correlation with US stocks. Is it worth giving up some yield for better diversification?

From Morningstar

Vanguard total bond market adm 6.75 yr effective duration -10.82 ytd
V Intermediate term bond adm 6.42 effective duration -10.98 ytd
V Intermediate Term Treasury adm 5.32 years duration -8.17 ytd
V Intermed TE adm 4.35 effective duration -8.1 ytd

 

[audreyh1]

Could definitely be that corporate issues are getting hit harder (spreads are widening), but I also notice that the two treasury funds you listed had shorter duration. On the other had 5 and 10 year treasuries are yielding about the same right now, and 2 years are just slightly lower, so it probably the lower credit quality.

 

[RetMD21]

I found a link from Morningstar indicating lower correlation between stocks and government bonds https://www.morningstar.com/article...-provide-the-biggest-diversification-benefits

 

[audreyh1]

I found a link from Morningstar indicating lower correlation between stocks and government bonds https://www.morningstar.com/article...-provide-the-biggest-diversification-benefits

That’s generally true.

 

[RetMD21]

I am using VBILX which is mixed. If the point is diversification, I can get more with the government bond fund at the cost of less yield.

U.S. Government
57.20%

AAA
2.10%

AA
2.60%


A
15.70%


BBB
22.30%


Less than BBB
0.10%