I'm still of the mind that the US 10 year will hit 1%. We'll see if it might go lower when it gets there.
The closer we get to 1.0% the less likely the FED will raise rates - the US$ would rise hurting exports, and decreasing import prices - hurting domestic producers.
What do you think?
U.S. 10yr1.64-0.000.26%
German 10y0.27-0.0516.56%
Italy 10yr1.58-0.010.51%
Spain 10yr1.45+0.000.08%
U.K. 10yr1.34+0.000.29%
Japan 10yr0.28-0.013.38%
Euro1.13-0.000.18%
Yen117.53-0.750.64%
Pound1.51+0.000.22%
Australia$0.78+0.000.48%
Comments
It would probably mean things have deteriorated here in the US.
I do believe this is part of what you are witnessing with global yields on gov't. debt issues. A race to the bottom, eh?
Sadly, I also feel that some gov't. debt is also "junk".
ECB will reportly buy 10% of public Spanish debt
Two that I have linked in the past years; but are still valid today.
QE, Clarke and Dawe
European Debt Crisis, Clarke and Dawe
Catch
I don't know how low yields will go ... but, they are now low enough for me to start to make some changes within my portfolio's overall asset allocation.
I have now lowered my allocation to fixed income within my portfolio form 25% to 20%. It seems many of my hybrid income, conserative and moderate allocation funds have been reducing their allocation to fixed income for sometime along with reducing the duration.
I can remember when a 30% to 35% allocation to fixed income was of the norm for me and of that allocation I held a good slug in tax free muni's. Not so now.
In addition, since domestic equities in general appear to be mostly overbought I am thinking of changing my allocation to 20% cash, 20% income, 20% domestic equity, 20% foreign equity, 20% other assets. To do this, I'll have to reduce my domestic equity allocation by 10% and increase my allocation to other assets by 10%.
Currently, I don't feel fixed income is paying enough to justify holding as much of it as I have in the past and with domestic equities being mostly overbought well it is time for a change to my overall allocation.
I'll be interested to learn how one of the board's master investors, Ted, positions going forward.
Old_Skeet
You noted: " It seems many of my hybrid income, conserative and moderate allocation funds have been reducing their allocation to fixed income for sometime along with reducing the duration."
>>>I will assume (a dangerous proposition) that the areas you mentioned "seem" to be reducing their allocation to fixed income. Is this based upon prospectus data that is 3 or more months old; or do you see this from another source?
You also noted: "Currently, I don't feel fixed income is paying enough to justify holding as much of it as I have in the past....."
>>>By paying, I again with presume you mean "yield". This is true of course, because of buying in these sectors. The yield is of little consequence at this point, with the price appreciation being the major value with fixed income. Fixed income is also a widely used term in writings. 'Course, I know that you know and understand that "fixed income" has many flavors. Even the much media bashed PTTRX is +2.62% YTD with "fixed income".
Lastly, you noted: " increase my allocation to other assets by 10%."
>>>What are other assets? I ask, as I know your holdings cover a lot of turf.
Just trying to get a drift of your words.
Thank you Old_Skeet, for your continuing investing thoughts posted to this fine site.
Take care,
Catch
Thanks for your interest and inquiry about my post.
In recently review of my many hybrid funds through Instant Xray I have noticed that many of these funds have reduced their allocation to fixed income assets and have raised their allocation to cash, equities and other assets or to some combination of these. There are many assets that can fall into other asset area in Instant Xray. Some of these are convertibles, preferreds, MLP’s, precious metals, options, futures, commodities, covered calls, etc. Naturally, I’d be looking at mutual funds that specialize in these type of holdings over holding these investments themselves.
In my use of the word “paying’ I would be meaning total return. It seems I have some fixed income funds that have not been able to maintain their nav as their distributions are now exceeding nav growth thus resulting in a decline in their nav. My posture is that if funds are not growing their nav … overtime … they simply are not kept. I am reading the tea leaves with my fixed income funds as I believe interest rate headwinds are coming and with this it will be difficult for them to maintain and/or grow their nav’s while at the same time paying a decent yield.
With domestic equities being mostly overbought and with forward earnings being of suspect of late ... headwinds are perhaps here for them too.
Yep, just looking to divide the pie more evenly.
Old_Skeet
http://www.zerohedge.com/news/2015-01-31/16-global-government-bonds-now-have-negative-yield-here-whos-buying-it