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With rising rates, how high is high enough to sock it all in long bonds?
Old 06-20-2022, 05:22 PM   #1
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With rising rates, how high is high enough to sock it all in long bonds?

As I read much of the enthusiasm on I-bonds, I went back and looked at the historical rates on the USG 30 year bonds (rate peaked around 15%) when inflation was high in the 80s. If it really does take raising the federal funds rate to above the rate of inflation, won't the long bond be a great deal? Imagine a guaranteed 12% return for 30 years... as good as Bernie Madoff.

I'm probably missing something big here...just a big what if? to look forward too...or not.

https://www.macrotrends.net/2521/30-...te-yield-chart
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Old 06-20-2022, 05:28 PM   #2
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Even 15% on the 30-year bond. And I was young, inexperienced then, and not having a lot of money anyway to take advantage of it.

Dunno if it will be repeated, but if it is, I will know what to do.

PS. I did get double-digit interest on a few $K with the credit union at work, but of course it was not for 30 years.
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Old 06-20-2022, 06:23 PM   #3
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In 1985, I had a savings bank account that paid 10 percent interest. It was not a CD. Mortgage rates were in the teens.
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Old 06-20-2022, 09:21 PM   #4
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Quote:
Originally Posted by SnowballCamper View Post
As I read much of the enthusiasm on I-bonds, I went back and looked at the historical rates on the USG 30 year bonds (rate peaked around 15%) when inflation was high in the 80s. If it really does take raising the federal funds rate to above the rate of inflation, won't the long bond be a great deal? Imagine a guaranteed 12% return for 30 years... as good as Bernie Madoff.

I'm probably missing something big here...just a big what if? to look forward too...or not.

https://www.macrotrends.net/2521/30-...te-yield-chart
I'd be jumping all over TIPS if they ever wandered back towards the high 3's (real return).
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Old 06-21-2022, 10:36 PM   #5
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In 1985, I had a savings bank account that paid 10 percent interest. It was not a CD. Mortgage rates were in the teens.
That's amazing!
I opened an IRA at Fidelity in 1986. $500 the first year, & added $250 in 87 & 88

In 1989 I had $10,000 to invest. Couldn't resist locking in a 2 year cd at 9.00% a year. It was @ Citibank which at the time, was located in South Dakota & had ads in the local newspaper almost every week.

More than once, while talking to younger people, I've mentioned those CD's & they ask me "what's a CD?
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Old 06-22-2022, 03:37 AM   #6
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That's amazing!
I opened an IRA at Fidelity in 1986. $500 the first year, & added $250 in 87 & 88

In 1989 I had $10,000 to invest. Couldn't resist locking in a 2 year cd at 9.00% a year. It was @ Citibank which at the time, was located in South Dakota & had ads in the local newspaper almost every week.

More than once, while talking to younger people, I've mentioned those CD's & they ask me "what's a CD?
It's something you put in your CD player. I have boxes of them!

Mike
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Old 06-22-2022, 12:21 PM   #7
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I've told my wife if 20 year T-bonds hit 8% ever again we're putting 100% of our money into those. Barring Wiemar Republic-style hyperinflation that would provide more than enough income until we die and have zero risk.
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Old 06-22-2022, 02:12 PM   #8
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Back in the mid 1980's, we bought two $10,000 CD's paying 12% at Columbia Savings and Loan in Los Angeles. That was the big bank that went under shortly afterward. Didn't lose anything though.
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