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Investors Pile Into Treasury Bond Funds For 10th Straight Week
FYI: Investors have piled into U.S. mutual bond funds and exchange-traded funds targeting Treasury debt for 10 consecutive weeks, the longest stretch in nearly five years.
Look out below! The average weighted price of bonds in Vanguard's Long-Term Treasury VUSTX is $110.58. If that is not a recipe for disaster somewhere down the road, I don't know what is. The average coupon is 3.67%. The actual 30-day yield is 2.29%. It doesn't take a rocket scientist to see the potential problems here. Just moving to intermediate-range bonds in VFIUX brings the average price down to $100.41, but there is still some disconnect with the average coupon at 2.97% vs. a yield of 1.29%. Still much safer than long-term treasuries.
@BobC, The difference in yield is sizable as you pointed out. For one reason or the other, most people don't buy treasury directly, but they buy funds.
Everybody claims they buy low and sell high, but stats like this don't support it.
Pretty sure I also read that there were massive redemptions of equity funds during the first 6 weeks of the year - right about the time the recent lows were reached. Human psychology is what it is ... and often works against self-interest in investing.
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The difference in yield is sizable as you pointed out. For one reason or the other, most people don't buy treasury directly, but they buy funds.
Pretty sure I also read that there were massive redemptions of equity funds during the first 6 weeks of the year - right about the time the recent lows were reached. Human psychology is what it is ... and often works against self-interest in investing.