Bond funds

[ripper1]

I read an interesting article from Terry Savage about bond funds. She said that today's announcement the the government wants to Go Big to bail out the economy by creating at least a trillion dollars to help individual and small businesses gave a little cheer to the stock market. But the bond market may look out and see inflation on the distant horizon. She is saying that there could be some concerns that some bond issuers won't be able to pay the promised interest in a recessionary economy. That bond funds fall quite a bit. Gee, where do you go to hide. My bond funds are VBTLX and FXNAX.

 

[foxfirev5]

That's why I went to CD's over the last 4 years. Now it is too late. Caveat - I hold to maturity.

 

[mijoy]

. Gee, where do you go to hide. My bond funds are VBTLX and FXNAX.

FXNAX lost 1.8% today. Cash - I think I'll stay in cash.

 

[statsman]

FXNAX lost 1.8% today. Cash - I think I'll stay in cash.

Ugh. We're bond fund heavy. I don't even want to look at the balances.

 

[COcheesehead]

Lots of bond liquidations. Spreads are widening. Junk looks like well, junk. Own it at your own risk.

Huge move for bonds today as the 10 year jumped back over 1%.


All you borrowers, did you lock in your rate?

 

[ripper1]

I can go in Stable Value fund and VMMXX. Hopefully those are safe.

 

[mijoy]

Lots of bond liquidations. Spreads are widening. Junk looks like well, junk. Own it at your own risk.

Huge move for bonds today as the 10 year jumped back over 1%.


All you borrowers, did you lock in your rate?

Pardon the greenhorn question -

It is a fund, doesn't that mean there is nothing to "lock in"?

 

[mrfeh]

FXNAX lost 1.8% today. Cash - I think I'll stay in cash.

Yet still up 1.4% YTD and 8% over the last 12 months. It's the best performer in my portfolio.

Don't allow headlines and daily moves be the impetus for emotional reactions.

 

[Dtail]

Pardon the greenhorn question -

It is a fund, doesn't that mean there is nothing to "lock in"?

I think the reference is towards for example folks getting mortgages, etc.

 

[LRDave]

There is a good thread this AM over on BH about this article. Well-regarded BH poster nisiprius provides some excellent data-backed commentary. Many posters opine that this is mostly a click bait article. Of course bond funds can rise and fall, but my FXNAX and FXAIX have provided ballast so far compared to my equities.

 

[mijoy]

Yet still up 1.4% YTD and 8% over the last 12 months. It's the best performer in my portfolio.

Don't allow headlines and daily moves be the impetus for emotional reactions.

Before all this came about I used mostly cash and CDs along with stocks for my AA (not bonds or bond funds). Now I am beginning to explore bonds/bond funds. So I am not familiar with bond fund behavior and it's susceptibility to daily fluctuations. I do know that bond 'prices' will drop with inflation therefore funds will reflect this loss. But there is little risk of that in the near term (at least). Although I did expect fluctuation I did not expect to see anything in the magnitude of >1% on a daily basis.

Caught me by surprise. Seemed excessive.

 

[Dogpeace]

Interest rates just went to zero, and bond prices should have been helped by that. The real question is about future interest rates... if all this money being pumped into the system now causes inflation, will interest rates rise and harm the bond prices then?

 

[ripper1]

Well, my ballast side is 40% stable value, VMMXX, and CD. The other 10% is VBTLX and FXNAX. The FXNAX is in my HSA account. Maybe leave well enough alone. This is just so frustrating. Maybe I should take Jack Bogle's advice....Don't do something...just stand there.

 

[Dtail]

Interest rates just went to zero, and bond prices should have been helped by that. The real question is about future interest rates... if all this money being pumped into the system now causes inflation, will interest rates rise and harm the bond prices then?

Agree but showing up more so on the longer side of the bond yields, with the fed rates staying near zero on the short side.

 

[COcheesehead]

Pardon the greenhorn question -

It is a fund, doesn't that mean there is nothing to "lock in"?

The lock in was referring to the folks in threads regarding taking out a loan.

 

[Montecfo]

I know there were people predicting in inflation with the 2009 stimulus. Seems implausible to me. Deflation would be a larger fear due to overall reduced economic activity.

 

[Dogpeace]

I know there were people predicting in inflation with the 2009 stimulus. Seems implausible to me. Deflation would be a larger fear due to overall reduced economic activity.

2009 stimulus was direct to targeted businesses. I actually worked for a manufacturer at the time - we go 50 million to invest in new plants, R&D, etc. Was a good idea.

Contrast that with the current proposal to put cash in people's bank accounts. 2009 was not putting cash into the economy and did not cause inflation but today's helicopter money plan surely will.

 

[Montecfo]

2009 stimulus was direct to targeted businesses. I actually worked for a manufacturer at the time - we go 50 million to invest in new plants, R&D, etc. Was a good idea.

Contrast that with the current proposal to put cash in people's bank accounts. 2009 was not putting cash into the economy and did not cause inflation but today's helicopter money plan surely will.

Yeah, I think the biggest chunk of the 2009 stimulus went to states who used it for teachers and government workers. There were not that many "shovel ready" projects as was later admitted.

Government money injected into the economy could be "inflationary". But the reality has been in slow growth economies and with globalization and pricing pressure from newer market entrants, inflation has been muted. I do not see that changing.