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What's going to happen w/ Bond Funds
Old 08-29-2006, 04:45 PM   #1
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What's going to happen w/ Bond Funds

If the Fed has ceased moving rates upward, can we expect that bond funds will finally produce decent returns?
I see that Vanguard's Prime Money Market Fund is now yielding 5.11% and
Vanguard's Short Term Invest. Grade Investor Shares fund is yielding 5.12%.
Which would be the better place to put some money ?
Any help is appreciated.
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Re: What's going to happen w/ Bond Funds
Old 08-29-2006, 05:07 PM   #2
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Re: What's going to happen w/ Bond Funds

if any of us could answere that we would be very very rich
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Re: What's going to happen w/ Bond Funds
Old 08-29-2006, 05:22 PM   #3
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Re: What's going to happen w/ Bond Funds

Bill Gross at PIMCO called the start of the bond bull market in July. The yield curve backs him up. Bonds probably won't make you very rich, but if rates were to drop down to 3%, then a fund with a 5-year duration would get a nice little 10% goose. Of course, it all depends on inflation.
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Re: What's going to happen w/ Bond Funds
Old 08-29-2006, 07:13 PM   #4
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Re: What's going to happen w/ Bond Funds

My take is that the Feds are done moving rates up, or they will at most move up another 25-50 basis points if they don't like the inflation data in the next few months.

I believe bonds have already built-in 25 basis points and I am actively pursuing ST index bond funds with cash I currently have in MMF. Some cash in CDs wouldn't hurt either in a 5 year CD ladder. I don't want to go longer than 3-4 year duration, but if you want to put some into longer duration, it's probably best to stick with TIPS....just in case inflation rears its head.
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