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AGG Up 8.4% This Week

edited March 2020 in Fund Discussions
It has the biggest buyer in the world now.

Comments

  • Similar to 2008 crisis, the Fed is buying bonds and lots of them. JNK also went up today while SPY went down. Think Fed is buying junk bonds too?
  • Are you guys inested in this?
  • Invested
  • Yes, total bond market index funds are in many retirement accounts.
  • It's more than that, to an extent; if you graph AGG since the first week of March against DODIX, FTBFX, also BOND and BND, you see that only the last comes close to matching it (and for longer periods also, and forget anything Pimco now except maybe TIPZ).
  • Hi @davidrmoran

    Just for the heck of it. From your list and few more.

    Some bond funds, 1 year to date
  • sure, very longterm
  • edited March 2020

    It's more than that, to an extent; if you graph AGG since the first week of March against DODIX, FTBFX, also BOND and BND, you see that only the last comes close to matching it (and for longer periods also, and forget anything Pimco now except maybe TIPZ).

    DODIX, FTBFX, BOND are managed bond funds while AGG,BND and VBTLX follow the US Total bond index and why they are very close long term.
    We also know that in market meltdown ETF price can be off their NAV because of trading stress.
  • Hi @davidrmoran
    You noted:
    since the first week of March
    My bad. Okay, so; the beginning of the week.....March 2 or the end date of the first week of March. What date ? Will try to get the graph to stick for a short time frame to move data here.

    OR, one may click and hold the left edge of the 254 day period and slide to the right to about 20 days to arrive very close to the beginning of March.

    Regards,
    Catch
  • FD1000 said:


    DODIX, FTBFX, BOND are managed bond funds while AGG,BND and VBTLX follow the US Total bond index and why they are very close long term.

    Usually, but not always. Index funds, especially bond index funds, are also managed, though perhaps not in the way you are thinking. I'll just quote Vanguard from its 2002 annual report for VBTLX:
    Of course, the objective of an index fund is to track its target benchmark closely. On this score, three of our four funds came up significantly short. The Total Bond Market Index Fund--our oldest and biggest bond index fund--returned 8.3%, well below the 10.3% return of the Lehman Aggregate Bond Index. Our Short-Term and Intermediate-Term Bond Index Funds also trailed their target indexes by about 2 percentage points. The Long-Term Bond Index Fund's return was within 0.4 percentage point of the target.
    ...
    As we explained in our report to you six months ago, our funds' returns will typically differ from those of the indexes for two primary reasons: The funds incur expenses that the indexes do not, and the funds' holdings do not exactly replicate those held by the indexes. The expense difference will always work against us in our goal of providing close tracking. The difference in holdings arises from our "sampling" approach to indexing, which is necessary because it would be impractical and very costly to own all the bonds in the target indexes.
    Around that time, the WSJ wrote:
    Those are huge discrepancies in the bond world, and an embarrassment for the Malvern, Pa., firm whose name is practically synonymous with index funds. The flexibility to deviate from the benchmark index is disclosed in the Vanguard's prospectuses for its bond index funds, but nonetheless is surprising for those under the impression an index fund mechanically invests in the securities making up its benchmark.
    "Indexing" is not synonymous with "unmanaged". Vanguard had tinkered with sector weightings. As the WSJ notes later in the article, it didn't change the prospectus in response to the poor management performance. The prospectus remains the same to the current day.

    Prospectus wording then (April 2012) and now (April 2019):
    In addition, each Fund keeps industry sector and subsector exposure within tight boundaries relative to its target index. Because the Funds do not hold all the securities in their target indexes, some of the securities (and issuers) that are held will likely be overweighted (or underweighted) compared with the target indexes. The maximum overweight (or underweight) is constrained at the issuer level with the goal of producing well-diversified credit exposure in the portfolio.
    Italics in original. What's "tight"? At least Fidelity quantifies the guardrails for its "index" fund: "The Adviser expects the fund's investments will approximate the broad market sector weightings of the index within a range of ±10%."
  • Usually, but not always. Index funds, especially bond index funds, are also managed, though perhaps not in the way you are thinking.
    A long narrative about nothing. We are talking about US tot bond index. The following 3 different funds from 3 different companies are very close. For 5 years as of 3-27-2020...BND(VG)+FXNAX(Fidelity)+AGG(Blackrock) performance is 3.36-3.37%.

    This is what you call investing based on an index and why they are so close.

    I didn't say ALL indexes in all cases, but, you knew all that.
  • msf
    edited March 2020
    You said that specific funds (not ALL) were not managed, period. And yet they are managed, but you knew that.

    More from the WSJ: "Vanguard's bond index funds will continue tilting toward corporate bonds instead of Treasurys, to take advantage of their higher yields. They will also continue to select bonds Vanguard analysts believe are stable and undervalued. "We try to overlay some intelligent design into our process," Mr. Volpert [of Vanguard] says.
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