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AAA longer duration bonds a bit better, U.S.T. issues, March 20, Friday PM close, watching.....

edited March 2020 in Fund Discussions
From a long ago song lyric: "Nowhere to run to, nowhere to hide."

All of the below government bill through bond types are down in pricing.

Our 72% bond/28% equity portfolio has no support from any area as of 12:30 EST.

Has this happened before in modern times??? Where the correlation between UST issues and equity markets have little meaning to one another.

ADD: Is the U.S. Treasury playing in the background to support yields???

--- SHY = (1-3 yr bills)
--- IEI = (3-7 yr notes)
--- IEF = (7-10 yr notes)
--- TLT = (20+ Yr UST Bond
--- EDV = (Vanguard extended duration gov't)
--- ZROZ = (UST., AAA, long duration zero coupon bonds)

If these circumstances remain through the week, don't look for many smiling faces in the investment world, as; not much will provide a positive return.

Be well; take care of you and yours,


  • edited March 2020
    Hi Sir

    Maybe down 4-5% today at end close...we probably stay volatile like this until few more weeks until they have good data from covid19. so far 31 deaths past few weeks [much less prevalence then flu but much more lethal I suppose.]

    Don't really know if it will down another 20-30s% until we are done

    There are no safe place to go presently maybe except CDs/Cash. US-T yield is so low right now not a good place to buy

    I was very surprised at Mama's fidelity port 55s% bonds 45% stocks down only 2% year total return
  • edited March 2020
    You do fully understand the function of the normal path of gov't. bills-bonds during periods of equity down market corrections, yes???
    The current circumstance I outlined is NOT NORMAL.

    The down move in your Mom's equity portfolio should normally be supported by a positive move from the bond portion. If nothing changes today, the overall portfolio will be down for today.
  • @catch22 The behavior of the treasury market does seem strange. Perhaps its because that market is beginning to price in the impact of a BIG fiscal stimulus package.
  • @davfor
    Thank you for your thoughts. Mr. T is scheduled to speak to the circumstances this evening at 9pm.
  • The below article link, written late today, expresses some reasoning as to yield increases today. Nothing really defined to me; and I will monitor for other writes about this subject that may offer definitive reasoning or examples.

  • Sounds to me like people want cash under the mattress.

    It's not hard to imagine given the constant chatter about government bonds going below zero, and liquidity evaporating elsewhere in the bond market.
  • edited March 2020
    I think going to cash and selling the perhaps overbought long funds are something I can accept. Still think yields are going lower and this is no sign of a rebound. We barely have a drop of the virus here and schools are starting to close including MSU. Are we not cutting two more times into the next month?!? Of course we are.
  • @catch22- @davidmoran just posted a link to a current NYT article. Seems that you're not the only one wondering what's happening. Here's an excerpt:
    Wednesday was an unsettling day on global financial markets, and not just because the stock market fell sharply enough to bring a decade-plus bull market to an end.

    Underneath the headline numbers were a series of movements that don’t really make sense when lined up against one another. They amount to signs — not definitive, but worrying — that something is breaking down in the workings of the financial system, even if it’s not totally clear what that is just yet.

    Bond prices and stock prices were moving together, not in opposite directions as they usually do. On a day when major economic disruptions resulting from the coronavirus pandemic appeared to become likelier — which might be expected to make typical market safe havens more popular — many of them fell instead. That included bonds of all sorts and gold.

    And there were reports from trading desks that many assets that are normally liquid — easy to buy and sell — were freezing up, with securities not trading widely. This was true of the bonds issued by municipalities and major corporations but, more curiously, also of Treasury bonds, normally the bedrock of the global financial system.

    People, it is fair to say, are worried about bond market liquidity.
  • edited March 2020
    Yes - the ship is tossing and floundering around looking for a port (reminiscent of “The Flying Dutchman” I was planning on seeing in May). I agree with @Catch22’s overall observation. Only a nut like me would try to predict. But here we go:

    - Short rates have turned up since bottoming under 0.5% on the 10 year earlier. Finished at 0.8% today. The current conventional wisdom that U.S. rates will drop to 0 and than keep falling may be wrong. They may now be rising. Might relate to @Mark’s mortgage issue, as mortgage rates are closely linked to the 10 year treasury.

    - Gold’s been hammered. Yet a lot of smart people have been high on it - Ray Dalio, Bill Fleckenstein, Mark Mobius among them. I’ve always thought gold was a manipulated market and this might be the “shakeout” of weaker hands in advance of another rise. Just a guess based on the easy money that’s flooded global markets for years.

    - Equities. I’m amazed when people pour money into a fund that’s up 20, 30, 40% in a year’s time. Somehow that makes sense to them. But after a similar drop in value folks run away. Maybe that works for them. Wouldn’t for me.

    Sorry - Diverging here. So I think (over the next year) it’s down for rate-sensitive bonds, up for the precious metals and sideways for global equities. The virus is nasty. Lot of unknowns. On the other hand - we haven’t been invaded by the Russians (physically), Trump hasn’t lobbed a Nuke at some little country (yet) and a spaceship from another planet hasn’t landed in Manhattan. (It just always looks that way.)

    I’m beginning to rotate slowly out of RPGAX and back into DODBX. Risk reward factor is starting to favor the latter - especially if rates eventually rise, which they’ve long expected and positioned the fund for.

    Best wishes. Stay well.
  • @hank. I'm sticking with RPGAX for my MILs account. Can you clarify why you think DODBX is a better bet going forward?
  • Hi VF -

    RPGAX is a great fund. Much better “hedged” than most, as you know. It’s not an easy decision for me. One ingredient in my thinking is I have been holding DODIX as “cash equivalent” in my portfolio and no longer think that’s a viable option due to the super low short term rates (nowhere to go but up). So today I shifted a bit from DODIX into DODBX and at the same time moved an equivalent amount from RPGAX into TRBUX.

    What I really intended to suggest to folks is that there is another option to just deploying precious cash if you want to add some risk to the portfolio. That us to gradually move from your more conservative allocation / balanced funds into more aggressive ones, In this case, DODBX is the more aggressive of the two - typically holding 65-70% in equities. And, as I mentioned, they’ve positioned the fund to benefit mightily from any rate increases by overweighting financials To wit - I’m early in this move and will be punished.

    Nasty day for most of us. You’d think the world is about to end,

  • @Catch22- Here's a short version of a current WSJ article which seems to be reflecting some of your concerns.

    Funding strains in the banking system worsened slightly Friday despite the New York Federal Reserve’s offer to inject $1.5 trillion of extra short-term funding.

    The strains suggest the Fed’s promised injection of central-bank money, announced Thursday, hasn’t fully solved the banking system’s issues. Some analysts and investors think a return to a full quantitative easing—or bond-buying—program will be needed to calm funding markets that lie at the center of the world’s financial infrastructure.

    Bond and equity markets remained volatile and price moves may not reflect normal changes in investors’ appetite for risk, according to analysts.

    In a sign of growing funding strains in the banking system, indicators of the difference between the rate at which banks lend to each other and the Fed’s interest rate increased to the highest level since the tail end of the 2008-09 financial crisis.

    The Fed offered up to $1.5 trillion for periods of one month and three months Thursday and Friday. However, banks only drew a total of $119.5 billion, suggesting this wasn’t the kind of liquidity they needed. The low takeup suggests that the problems might not be so simple as a shortage of central-bank reserves.

    “There is lots of money in the system but it is not circulating easily,” said a foreign-exchange strategist at UBS. “The ability of the financial system to intermediate in this market is now very constrained.”

    The underlying problem, say some investors, is that banks are holding too many Treasurys and don’t want any more. It is a situation that hasn’t been fully resolved since it was exposed by a spike in borrowing costs in repurchase—or repo—overnight
    borrowing markets in September.
    The preceding is a substantially abridged selection from the original WSJ article.

  • edited March 2020
    Thank you @Old_Joe for the WSJ overview

    The below link is from a report about noon on Friday. Most Treasury issues prices remain negative at 3pm, and in particular the 30 year stuff which is -2 to -3%. Yields moving UP. So, I still don't understand what is happening. Sure as hell, something is broken somewhere in the financial system.
    The fully and totally beaten up corp. bond market is shining so far today, which are at about a +5%. Trading like an equity and may crash and burn before the end of the market day.

    Treasury Buying issues starting with 30 year bond
  • edited March 2020
    Not directly related to COVID-19; but the current results are similar.

    I posted this back in 2011; or there about. I need some comic relief again, don't know about you.
    Are we all going to receive another quantitative easing? I don't know. What's left to do.

    Sadly, Mr. Clarke passed in 2017. These two put so many financial events in a comic light, based in truth.
    NOTE: you may need to click the play arrow two times

  • I've already stepped through this previous; but a re-do for those who didn't read/see.

    A quick look at S&P's bond rating guide:
    "AAA" and "AA" (high credit quality) and "A" and "BBB" (medium credit quality) are considered investment grade. Credit ratings for bonds below these designations ("BB," "B," "CCC," etc.) are considered low credit quality, and are commonly referred to as "junk bonds."

    For those wondering why no support for their portfolio via the bond route, well; this past week didn't really matter. AAA U.S. gov't. issues had no support for whatever reasons remain in something still "broke to hell" with credit freeze or whatever is amiss. For bond portfolios that have a much lower rating for bond holdings, the damage was more critical. I'm sure active managed funds attempted to "fix" their holdings with better quality bonds, but this didn't help either. I expect more action from the Treasury and/or the Fed. next week to attempt to slow down the falling knife.

    I now see, my link has already been posted while this write was delayed in draft mode. None the less, this will stay here.

    Corporate debt at $75 trillion.
  • "I now see, my link has already been posted while this write was delayed in draft mode. None the less, this will stay here."

    Relax. We no longer need to tremble in fear if we post a duplicate link. That whole business was so damned silly anyway.

    (But you damned well better not duplicate any of MY links!) :)
  • Relax. We no longer need to tremble in fear if we post a duplicate link. That whole business was so damned silly anyway.

  • edited March 2020
    For sure. If several folks think that a link is important, then what's the harm in multiple resources? There was only one old guy who really got upset by multiple links anyway, and he's no longer present. He felt that he "owned" any link that he posted. Ridiculous.
  • edited March 2020
    (I’m agnostic on the issue of duplicate links.)

    More importantly - on the bond issue Catch raises, I’ve been searching for a word to characterize the present situation. A seldom used noun, “Confuscation” seems to best fit. The word is so rarely used that your spell-checker will likely try to override it.

    Confuscation - Collins Dictionary: (1) n. “designed to confuse, e.g. a maze or puzzle” (link)

    Just when everyone was expecting rates to decline forever in the lee of Fed rate cuts, bond rates have begun to rise. As Gomer Pyle would say, “Surprise, Surprise!”. The 10-year spiked from somewhere around 0.40% early in the week to near 0.90% at week’s end. That’s a doubling in less than a week’s time.

    The Fed can try to set market rates with its peg on the overnight lending rate (and often succeeds), but there is no absolute guarantee longer rates will follow suit. Apparently, the “real world” bankers and bond vigilantes fear price inflation / depreciation of paper currencies more than the Federal Reserve does. I suspect this is all related to the repo and liquidity issues David and others have commented on in the past - but it’s a bit beyond my pay grade.

    Bonds got hammered late in the week. If your bond fund has some credit risk (ie BBB / high yield) it probably held up better at week’s end as equity markets stormed ahead (good for lower rated bonds). The bloodbath Friday was more related, I think, to the high quality (rate sensitive) areas. By way of example, here’s one way it affected me: Over the past 7-10 days the nav on T. Rowe’s ultra-short bond fund TRBUX has tumbled from around $5.05 / $5.06 all the way down to $5.01 on Friday. That’s a huge decline for a sedate cash-equivalency fund like this one.

    As Catch mentions, many other synergies investors had come to depend on over recent years decoupled last week as well. Miners suffered double-digit losses on several days (-13% on Friday alone). Absolute carnage. That move defied the prevailing wisdom among many gold “experts” that the miners were undervalued relative to gold. A lot of $$ was lost last week by those employing leverage to bet on miners outpacing the metals. Likely we haven’t yet seen all the fallout from that bust.

  • The Fed is expecting to cut 75 to 100 basis points. The race to the bottom is on! Next is to buy assets at even more higher level than 2008.
  • edited March 2020
    A look at pre-market (9AM) issues for Treasury/corp. items:

    --- SHY = (1-3 yr bills) +.3%
    --- IEI = (3-7 yr notes) +1.2%
    --- IEF = (7-10 yr notes) +1.9%
    --- TLT = (20+ Yr UST Bond +4.3%
    --- EDV = (Vanguard extended duration gov't) side ways all pre-market morning

    --- LQD = (corp. bond proxy) -5%

    Midnight/Monday found the most positive actions with most of these issues. The positive price gains at 9AM pre-market have dropped overnight.

    Reference note: long term Treasury's were +11% range at 1am

    I can't offer more, and will watch, too.
  • Monday, March 16 close numbers; which will be reflected in your bond fund holdings or allocation fund; depending on sector exposure and percent mix.

    Gov't. issues, except LQD

    --- SHY = (1-3 yr bills) +.16%
    --- IEI = (3-7 yr notes) +1.04%
    --- IEF = (7-10 yr notes) +2.64%
    --- TLT = (20+ Yr UST Bond +6.48%
    --- EDV = (Vanguard extended duration gov't) = +6.04%
    ---ZROZ =Treasury, 30 yr. zero coupon = +8.39%

    --- LQD = (corp. bond proxy) -1.42%

    Bonds acted a bit more normal today, in relation to the equity markets.

    We'll discover what later in the evening may bring forth.
  • PTIAX granted scheduled mid-month dividend. That should account for some of the .10 cent loss per share. The div was for .06 cents/share.
  • edited March 2020
    @ Crash- was that dividend 6 CENTS or 0.06 cents? (Decimal points can sometimes make quite a difference.)
  • ORK! Yes, six cents/share.
  • Morning........Friday, March 20, 9am
    Overnight and pre-market suggests that AAA bonds are a bit more "normal" in actions relative to the existing equity tensions.
    Corporate bonds and junk bonds appear to have some bottom fishing in place.
    If these Friday trends were to continue, one may expect some positive pricing to close the day; and reflected in some narrow focused bond funds, as well as whatever "your" particular holding has within its "bond mix".
    Take care,
  • I've removed the prior Dumbfounded title; as apparently the Fed. has fixed credit markets for awhile, and/or all of the folks who had to raise cash are about finished with that exercise; and the big selling is done. I'm sure a few of these folks are surprised at how low their stash of liquors or wine changed in just one week.

    Many bonds acted a bit more normal today (March 20, Fri.), in relation to the equity markets.

    Friday, March 20 close numbers; which will be reflected in your bond fund holdings or allocation fund; depending on sector exposure and percent mix.

    In particular, AAA bonds to the longer duration were the benefactors on Friday.

    Corporate bonds attempted a rally on Friday, but I suspect it was from short time traders and nothing meaningful.

    Corporate and High Yield continue to behave as noted previous; as these areas will remain twitchy, IMHO. Too much corporate debt and likely very little or no growth or negative growth to support these bonds. An big ouch period has arrived.

    A few views from bondland:

    DAY(March 20) / WEEK / YTD

    --- MINT = -1% / -3.6% / -4.1% (Pimco Enhanced short maturity)
    --- SHY = +.27% /+.24% / +2.5% (1-3 yr bills)
    --- IEI = +1.2% /+.7% /+5.2% (3-7 yr notes)
    --- IEF = +2.6% /+1.5% /+8.4% (7-10 yr notes)
    --- TLT = +7.5% / +3.6% /+18.1% (20+ Yr UST Bond
    --- EDV = +7.15% / -.23% / +19.8% (Vanguard extended duration gov't)
    --- ZROZ = +8.93% /+2.27% /+22.3% (UST., AAA, long duration zero coupon bonds)
    --- HYG = -2.24% / -12.9 / -20% (high yield bonds, proxy ETF)
    --- LQD = +1.6% / -13.25% / -16.2% (corp. bonds, various quality)
    --- LTPZ = +12.3% /+4.3% / +3.5% (UST, long duration TIPs bonds

    Overview for higher quality, longer duration bonds/bond funds/bond etf's. Will the trend persist? I hope so, but I'll be watching next week with you. This area continues to rely on what's brewing in the under belly of the credit markets.
    A the least for the quality bond funds one may have expects more to the positive side these past 2 weeks, but; in a way, these bonds did protect from a larger downside for a portfolio.
    I watched the daily numbers for one of the most plain vanilla bond funds available; being BAGIX. The managers were surely scratching and clawing to determine were to place the money. The fund caved a bit this past week and is now at -2.24% YTD.

    Let me know if you discovered a data error.

    Ok. Nap time for me.
    Take care of you and yours,

  • edited March 2020
    Thankyou ..have you change / switch to more equities recently
  • edited March 2020
    NO ! We hold about 28% in healthcare from several years ago and will sit with this.
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