Ridiculous CD rates - where now

If interest rates go up the value of bonds and bond funds will go down. I don’t think you’d want to sell after rates rise. A fund might mitigate the effect of rising rates.
 
Bond funds are not a substitute for CDs. Don’t take on more risk to chase yield.

And it’s almost impossible to anticipate interest rate changes. Nobody knows.
 
bobbee25 said:
How safe are short and intermediate bonds, when it looks like the interest rates may go up, sell them ?
Click to expand...
Define safe. Bonds have a risk of default. It's usually very low, but if things go really really bad, it may not be so low. All other investments will probably get whacked too. In normal times, a bond fund will give you the protection of numbers to minimize the effect of a few defaults. Investing in individual bonds, you need to do a little research and try to diversify as best you can. I'd bet most of the individual bond investors here have never had one of their bonds default.

If you're just talking about losing money, yeah, bond funds will lose money as rates rise, but the yield will go up as well. You can avoid loss on individual bonds by holding to maturity, but that locks you into that low rate.

You talk about selling if interest rates "may go up". Not so easy to predict, and what are you going to invest in when you do sell? And when do you know that they have stopped going up to get back in?
 
The problem with talking about bonds is... there are different kind of bonds with different risks.... are you talking about treasury bonds.. corporate bonds....muni bonds.... the list is long and each of those categories you have other choices with risk... short term...long term... ect..ect...

each type of bond has its own way to invest in them...
 
audreyh1 said:
Bond funds are not a substitute for CDs....
Click to expand...

Target maturity bond funds are very similar to CDs in that they invest in bonds that mature in a specific year and they do a terminal distribution in December of the target year. They are in a space between individual bonds and bond funds... but more similar to holding a proportional interest in a portfolio of individual bonds maturing in a specified year. There are treasury, muni and corporate flavors. Obviously the corporate version has a higher yield.... probably ~0.90% vs 0.50% or less for a 5-year CD... but there is credit risk associated with these... for IBDQ, 55% of its holdings are BBB, 35% A and most of AA or better.
 

Attachments

  • Capture.jpg
    Capture.jpg
    102.5 KB · Views: 74
Do you think even vanguard short-term corporate, or a couple of those short-term bond funds one to five years, the yield around 2% are too much risk? Like SLQD and the like?
 
Not sure if I would go there... weighted ave YTM is 0.67% and fee is 0.06% so net yield of 0.61% but duration of 2.36 years... so wouldn't a 26 bps increase in rates wipe out a full year of interest? at least in theory?
 
dixter said:
The problem with talking about bonds is... there are different kind of bonds with different risks.... are you talking about treasury bonds.. corporate bonds....muni bonds.... the list is long and each of those categories you have other choices with risk... short term...long term... ect..ect...

each type of bond has its own way to invest in them...
Click to expand...

+1
I haven't agreed with many of your statements but this is on point.
 
I suppose you're right. For some reason, I came up with around a 2% 30 day yield.
 
hotwired said:
I suppose you're right. For some reason, I came up with around a 2% 30 day yield.
Click to expand...



I admit to not really understanding bond fund yield. There are several metrics. Since I’m not buying bonds for capital gains, I only pay attention to distribution yield. I get a distribution yield on SLQD is 2.4% which is impressive. I’m using a single state muni fund with which has similar distribution yield and maturity but I get that tax free bump.
 
Hope you guys/gals have been on the right end of the Fed pumping the corporate bond market.... I have been trading bonds for over 40 yrs and I have never ever seen the above par valuations I am seeing these days... incredible... I'm seeing 40%...50% and higher ... I even found one last week a bond within a division of Disney that was 90% above par... so someone bought that bond for $1000 and its now at $1900/bond... what a deal for someone...

I tested a high yld treasury bond the last few months by buying the bond a day after the coupon payout and just held it till the next coupon payout and sold it the next day... its kinda scary buying a treasury at 47% above par just to hold it for the coupon and sell it back at the same valuation... but it is doable... lots of money to be made these days...
 
tenant13 said:
I converted SOME of my cash to USDC stable coin at Coinbase and distributed it between 3 lending platforms: Celsius (10.51% https://celsius.network/rates/) , BlockFi (8.6% https://blockfi.com/rates/) and Nexo (10% https://blockfi.com/rates/). It works for me and all 3 have been paying interest diligently as per their terms.
Click to expand...
I've got a coinbase (regular, not pro yet). Can you talk about the basics re staking cryptocurrencies? Any tips, cautions? I've got about 25K spread out over various coins with 30% of it BTC on regular coinbase. Considering doing some staking but want to be sure I understand the risk vs. reward
 
hotwired said:
I've got a coinbase (regular, not pro yet). Can you talk about the basics re staking cryptocurrencies? Any tips, cautions? I've got about 25K spread out over various coins with 30% of it BTC on regular coinbase. Considering doing some staking but want to be sure I understand the risk vs. reward
Click to expand...

I'm interested also, but perhaps this should be a separate thread.

I looked into blockfi.com recently, and the fees scared me away.
 
dixter said:
I tested a high yld treasury bond the last few months by buying the bond a day after the coupon payout and just held it till the next coupon payout and sold it the next day... its kinda scary buying a treasury at 47% above par just to hold it for the coupon and sell it back at the same valuation... but it is doable... lots of money to be made these days...
Click to expand...

I don't think I've ever seen the terms "high yield" and "treasury bond" used together....what exactly does it refer to? High yield is generally used for less than investment grade (e.g. "junk") bonds but treasury bonds would not fall into that category. And how can a bond priced 47% above par produce a high yield?
 
pb4uski said:
Target maturity bond funds are very similar to CDs in that they invest in bonds that mature in a specific year and they do a terminal distribution in December of the target year. They are in a space between individual bonds and bond funds... but more similar to holding a proportional interest in a portfolio of individual bonds maturing in a specified year. There are treasury, muni and corporate flavors. Obviously the corporate version has a higher yield.... probably ~0.90% vs 0.50% or less for a 5-year CD... but there is credit risk associated with these... for IBDQ, 55% of its holdings are BBB, 35% A and most of AA or better.
Click to expand...

bobbee25 said:
How safe are the Target maturity bond funds ?
Click to expand...

What do you mean by safe? Safe from what?
 
I gave up on fixed for now - bought ATT between $28-29 and just pretend it’s a 7% bond.

Yeah, I know, I know.
 
I bought a couple stocks like that. Then they cut the divvy by half but I’m still happy getting >3%.
 
bobbee25 said:
How safe are the Target maturity bond funds ?
Click to expand...
I have a ladder of the corporates. They've behaved like most good corporate bond funds. No complaints.
Black Rock offers different risk levels on the target date funds, from High Yeild to Treasuries. You can pick the risk level you wish.
 
We occasionally end up with us much as half a year's spending in the check book at one time. Usually happens after our yearly RMD (or whatever I'm calling it this year since I took it but didn't have to.) The nice wahine and tutus at the bank always suggest a CD when that happens. But our in-and-out flow can be spectacular, though "spotty" so it makes no sense to me to go for even a 3 mo CD or similar. Besides the interest is too paltry to even bother. I'd keep it under the mattress before I'd give the banks the pleasure of tying up my cash for so little interest. But, I'm not bitter!:angel: Besides, I love the folks at the bank - 90 degress off topic, but I would miss going to the bank if I decided to bank online. YMMV
 
jazz4cash said:
I don't think I've ever seen the terms "high yield" and "treasury bond" used together....what exactly does it refer to? High yield is generally used for less than investment grade (e.g. "junk") bonds but treasury bonds would not fall into that category. And how can a bond priced 47% above par produce a high yield?
Click to expand...

Can only assume he meant "high coupon".
 
You must log in or register to reply here.

Similar threads

Earl E Retyre
I am a secondary market brokered CD convert
2
Replies
35
Views
2K
hpnutty
hpnutty
W
Should I buy CDs, Tres or the Total Bond Fund
Replies
5
Views
1K
pb4uski
pb4uski
Tranquility Base
Second Brokerage Account As a Substitute for Savings Account
Replies
17
Views
725
Sojourner
Sojourner
Finance Dave
Big purchase, how to pay?
2
Replies
31
Views
4K
dmpi
D
C
Preservation with CD’s
2
Replies
37
Views
3K
Rianne
Rianne

Latest posts

Back
Top Bottom