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Ted, I agree that short is a good idea right now. For our domestic bond positions, we are sticking to mostly shorter-duration funds, like Artio BJBGX, Osterweis OSTIX, BlackRock BSIIX, Lord Abbett LLDYX, Federated FGMAX. But we also use Loomis LSBDX because of their skills and flexible strategy. In foreign bonds, we use Templeton TGBAX as a core holding, then add Goldman GSDIX and GIMDX to favor either dollar or non-dollar local bonds. So more cautious for sure with domestic bonds. In munis, we would be buying more shorter-duration funds like Thornburg LTMIX, U.S. Global NEARX. We have clients who have owned Vanguard VOHIX and Fidelity FOHFX for a long time, and we are reducing these positions in favor of the shorter-duration options.
You noted: "We have clients who have owned Vanguard VOHIX and Fidelity FOHFX for a long time, and we are reducing these positions in favor of the shorter-duration options."
>>>>> Meaning the clients are reducing tax favored munis to move to other Ohio munis of shorter duration; or reducing munis and moving monies into taxable short term Fed. gov't debt?
---We have the Fed. Reserve supposedly selling short duration and using the monies to support the low yield of the longer duration in the continued effort to support low mortgage rates and any other longer term financing by others (business, etc.). --- Frightened money appears to move more to the durations below 7 years, as of the past 3 years; but not the very short end of duration (less than 1 year). One may suppose a sweet spot is attempting to be discovered. --- One may also suppose that very large and long term players in this area are having some very aggravating days; being the pension funds and the annuity sections of insurance companies attempting to discover how to support growing money for long term payouts. How long will the Federal desire to, or need to support yields in various durations is an ultimate question. Who will be the other buyers? What if global/U.S. growth continues a sideways move at the very best; and/or a deflationary trend develops with continued delevering of consumers. How many consumers here and abroad have and/or will temper their spending habits for the needs versus the wants; in particular being the very large group of baby boomers in many developed countries?
The bond duration(s) questions and possible answers are no less complex than attempting to value the equity markets in given sectors. There are many central bank forces at work, soveriegn/public banks hold suspect loans/bonds; as well as playing the funny games with money and markets and consumer spending in some developed countries will likely continue to be a concern, too.
Reply to @catch22: Hi catch. That's a great question. One thing we have always tried to get across to clients is the taxable-equivalent yield compared to tax-free. Our suggestion has been that tax-free bonds may not be attractive when investors can access taxable bonds with similar risk profiles that have higher after-tax yields. But some investors still want tax-free bonds. To answer your question, in most cases, we are moving from longer-duration munis to shorter-duration munis (equivalencies be damned). Of course, this issue is moot in tax-deferred accounts.
Comments
You noted: "We have clients who have owned Vanguard VOHIX and Fidelity FOHFX for a long time, and we are reducing these positions in favor of the shorter-duration options."
>>>>> Meaning the clients are reducing tax favored munis to move to other Ohio munis of shorter duration; or reducing munis and moving monies into taxable short term Fed. gov't debt?
Thank you,
Catch
---We have the Fed. Reserve supposedly selling short duration and using the monies to support the low yield of the longer duration in the continued effort to support low mortgage rates and any other longer term financing by others (business, etc.).
--- Frightened money appears to move more to the durations below 7 years, as of the past 3 years; but not the very short end of duration (less than 1 year). One may suppose a sweet spot is attempting to be discovered.
--- One may also suppose that very large and long term players in this area are having some very aggravating days; being the pension funds and the annuity sections of insurance companies attempting to discover how to support growing money for long term payouts.
How long will the Federal desire to, or need to support yields in various durations is an ultimate question. Who will be the other buyers? What if global/U.S. growth continues a sideways move at the very best; and/or a deflationary trend develops with continued delevering of consumers. How many consumers here and abroad have and/or will temper their spending habits for the needs versus the wants; in particular being the very large group of baby boomers in many developed countries?
The bond duration(s) questions and possible answers are no less complex than attempting to value the equity markets in given sectors. There are many central bank forces at work, soveriegn/public banks hold suspect loans/bonds; as well as playing the funny games with money and markets and consumer spending in some developed countries will likely continue to be a concern, too.
Regards,
Catch