Can someone remind me what happened to bond market in March '05?

[dandan14]

Hi...
Quick question for all you bond aficionados.
What happened to the bond market in March of this year? Every bond fund that I look at took a 10-20% hit in March. Did Greenspan make an announcement that I am not remembering?

[JohnP]

DanDan

Two days and 97 reads and no answers - Well I'm not a bond aficionado but I like to be quantitative about performance and I do have some personal daily records on Vanguard funds including their bond funds going back to March of this year.* Vanguard trends are not all inclusive but it's all I can offer.

Here are a bunch of VG bond funds and their NAVs for 3/1 and 3/31/2005 and the delta percentages.

* * * * * * * * * * * * * * * * * * * ** * 3/1* * *3/31* * Deltas
Intrm-Term Bond Idx* *VBIIX* 10.55 10.41 -1.33%
Lng-Trm Bond Index* * VBLTX 11.88 11.69 -1.60%
Total Bond Mkt* * * * * * VBMFX 10.19 10.11 -0.79%
Intm-Trm Corp Bond* * VFICX* * *9.97* *9.85 -1.20%
GNMA Fund* * * * * * * * * VFIIX* * 10.39 10.33 -0.58%
Intm-Term US Trsry* * *VFITX* * 11.12 11.01 -0.99%
Insrd Lg-Trm Tax* * * * *VILPX* * 12.76 12.60 -1.25%
Inflation Protected* * * VIPSX* * 12.52 12.47 -0.40%
Lng-Trm US Treasury* *VUSTX* *11.55 11.39 -1.39%
Hi-Yield Tax-Exempt* * *VWAHX 10.82 10.70 -1.11%
Long-Term Corp Bond* VWESX* *9.62* *9.49 -1.35%
Intrm-Term Tax-Ex* * * *VWITX* 13.49 13.35 -1.04%
Lng-Trm Tax-Exempt* * VWLTX 11.43 11.28 -1.31%
Wellington Fund* * * * * *VWELX 30.58 29.83 -2.45%
Wellesley Income* * * * *VWINX* 21.84 21.33 -2.34%

What these say is that there was a loss in every one of these bond-related VG funds for this period but not 10-20%.* Looks like a lousy month but not earth shattering.* Maybe Greenspan didn't do anything awful in March after all.

Hope this is useful

JohnP

[JPatrick]

Quote:

Originally Posted by dandan14 Hi... Quick question for all you bond aficionados.* What happened to the bond market in March of this year?* Every bond fund that I look at took a 10-20% hit in March.* Did Greenspan make an announcement that I am not remembering?

The really short answer- - - Stay away from bonds when rates are a rising.

However........If you must, high yields, senior loan funds, and emerging market debt might suit you

[MRGALT2U]

Quote:

Originally Posted by JPatrick The really short answer- - - Stay away from bonds when rates are a rising. However........If you must, high yields, senior loan funds, and emerging market debt might suit you

I only own one bond fund and it's "hi yield". It's done great so far, about 2 years now I think. Never saw a real dip since I bought it.

JG

[justin]

Quote:

Originally Posted by JPatrick The really short answer- - - Stay away from bonds when rates are a rising. However........If you must, high yields, senior loan funds, and emerging market debt might suit you

Short term bond funds may end up having higher yields over the next few years than a money market fund. Vanguard has a few of them. The short term investment grade fund has a duration of 1.8 years I believe. These short term funds don't have as much interest rate risk as the intermediate and long term funds do.

[wabmester]

Quote:

Originally Posted by JPatrick The really short answer- - - Stay away from bonds when rates are a rising.

And stay away from stocks. And stay away from real estate.

The nice thing about bonds is that they are essentially guaranteed to recover if you hold the bonds to maturity or hold the bond fund for its average maturity. No other asset class can make that guarantee.

[justin]

Quote:

Originally Posted by wabmester And stay away from stocks. And stay away from real estate. The nice thing about bonds is that they are essentially guaranteed to recover if you hold the bonds to maturity or hold the bond fund for its average maturity. No other asset class can make that guarantee.

Don't forget default risk. You may not get your principal back if the bonds default. High yield investors, beware!

[JPatrick]

Quote:

Originally Posted by justin Don't forget default risk.* You may not get your principal back if the bonds default.* High yield investors, beware!

Which is why you buy a mutual fund

[Nords]

Quote:

Originally Posted by JPatrick Which is why you buy a mutual fund

Yeah, sure, like Heartland's high-yield muni bond funds?

[JPatrick]

Quote:

Originally Posted by Nords Yeah, sure, like Heartland's high-yield muni bond funds?

I don't think that one would have popped on my screen.
It should not be to tough to find a conservative, high yield fund with a decent track record (think Vanguard).
If not, thats why they invented the mattress.

[justin]

Quote:

Originally Posted by JPatrick Which is why you buy a mutual fund

Mutual funds diversify your bond holdings, but don't protect you from defaults. Some portion of high yield bonds will default (maybe only 1/2 of a percent or less). Hopefully the higher yield will offset the defaults.

[dandan14]

Quote:

Originally Posted by wabmester And stay away from stocks. And stay away from real estate. The nice thing about bonds is that they are essentially guaranteed to recover if you hold the bonds to maturity or hold the bond fund for its average maturity. No other asset class can make that guarantee.

That makes sense for individual bonds. But if you buy a closed-end or open-ended bond fund, there really is no such thing as "holding to maturity." Is there?

[MRGALT2U]

Quote:

Originally Posted by dandan14 That makes sense for individual bonds.* But if you buy a closed-end or open-ended bond fund, there really is no such thing as "holding to maturity."* Is there?

Nope