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10-Year Closing in on 1.5%

edited April 21 in Other Investing
As of 10:45 this morning Bloomberg is displaying a 1.49% yield on the 10-Year treasury bond. (Story from CNBC) The equity market doesn’t appear to like it very much. If you own intermediate term bonds (5 year duration) you’ll loose a bit, but equity investors may take a much larger hit if rates continue to rise. (conjecture, of course).

Running into equities to avoid the bond risk might amount to burning down the house to get rid of the mice. Keep in mind that as your bond / bond fund loses paper “value”, the rate of interest you are being paid increases. So it’s a 2-way street for those on the short-intermediate end of the curve.

Good thread from @Sven re Munger’s take on bitcoin. I tend to agree with Charlie. https://www.mutualfundobserver.com/discuss/discussion/57794/munger-on-bitcoin

Yesterday GameStop’s stock price rose over 100% in a single day. That kind of speculative erotism amounts to gambling. I also fear it points to a lot of “froth” in other areas / asset classes. Which ones? That’s the puzzle.
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Comments

  • And a rough day on the Street as a result. Zowie, Glad I sold yesterday. Wish I had done my buying today.
  • I bought quite a bit of VONE today, so that guarantees a serious and protracted crash, I tells you, guarantees
  • Interesting day. I kept seeing 10 year yield ... 10 year yield ... spooking equity holders and bitcoin negative impacting the market, stock market down headlines everywhere all day. CNBC, Yahoo, Marketwatch etc. etc.

    Logged into my Fidelity account and fully expected to see a 2-3 percent drop... I was up .26 percent for the day. Quite surprised about that. Small Caps holding up. Biggest funds negative were ARTYX and FSEAX - both down about 1 percent for the day.

    Joe Duran with Goldman Sachs was on with Maria Bartiromo this morning. It was a fantastic interview! I cant find it anywhere online otherwise I would link it. Perhaps it will be out in a day or two or it will be on a twitter feed. His summary of 2021? Expecting an 8 percent gain in S/P for the year. Stimulus and Fed accommodating... means a great year for equities, don't hold Bonds unless they are very short term etc. etc. Stimulus is pumping a ton of money into the economy. That money will be spent. That will lift all ships.
  • edited February 25
    Nasty day. About all that held up reasonably well for me was Price’s alternative fund TMSRX - off a mere .37%.

    Good interview in this week’s Barron’s with Felix Zulauf re various forces at work in today’s markets.
  • BIVRX was up for the day, 3.17%.
  • Looks like the sell-off has started with rising bond yield that put pressure on stocks. Tomorrow futures are trending downward too. Otherwise it is all RED and is not even Christmas!
  • MAINX down 0.27% , Best I could come up with.
    Stay Safe, Derf
  • JASVX +.01 was the only GREEN on my screen today.
  • CBHAX + .01
  • edited February 25

    His summary of 2021? Expecting an 8 percent gain in S/P for the year. Stimulus and Fed accommodating... means a great year for equities, don't hold Bonds unless they are very short term etc. etc. Stimulus is pumping a ton of money into the economy. That money will be spent. That will lift all ships.

    There is potential career risk if someone's prediction is wrong and it differs from "the crowd".
    In the past, many market pundits predicted 8% - 10% gains for a specific year but market returns rarely fall with this range. If all ships will be lifted, where will customers moor their yachts?
  • 1.47% right now. STILL very low. I'd not buy Treasuries at that rate. After all these years, I'm going to start my cash pile so I can buy some favorites, when those darlings fall far enough. I'm VERY glad I took a scheduled annual slug from the IRA BEFORE this current (brief?) "hit." Will it become an actual downturn? Who can say.
  • edited February 26
    JohnGaltill said: In the past, many market pundits predicted 8% - 10% gains for a specific year but market returns rarely fall with this range. If all ships will be lifted, where will customers moor their yachts?
    8-10% annual return seems overly optimistic given this low yield environment. Other analysts talk more about the challenges going forward and investment opportunities.
  • I've seen those numbers generally referred to as a long-term average return on stock investments. 8-10% is a base hit, not a home run.
  • ". Biggest funds negative were ARTYX and FSEAX - both down about 1 percent for the day. " @JonGaltIII I think you were looking at stale prices, maybe the day before ?
    ARTYX -3.36 FSEAX -2.08 Any way you look at it , Thursday was a downer !
    Stay Safe, Derf
  • @Derf - you are absolutely right. It was stale info. Fidelity was not updated when I looked. I was down 1.75% for the day. FDGRX, MESGX and MSSMX were my biggest movers in the wrong direction. Still long, though. Thanks for the correction.
  • edited February 26
    Crash said:

    I've seen those numbers generally referred to as a long-term average return on stock investments. 8-10% is a base hit, not a home run.

    Yes, these numbers approximate the stock market's long-term returns.
    I was referring to stock market predictions for a single year.
    I've observed these predictions often fall within this narrow range regardless of the environment.

  • beebee
    edited February 27
    A $50 Billion Unwind Fueled Treasuries’ Rout. It Has Room to Run
    (Bloomberg) -- A chaotic selloff in the Treasuries market was spurred by a massive exodus from popular trades, heightened by liquidity concerns that could inflict more pain in coming days.

    The exodus happened at a time when traders were already worried about the imminent disappearance of a support beam for the market -- a regulatory exemption that has allowed banks to accumulate more U.S. bonds.

    Treasury futures open interest across a range of maturities sank by a huge amount Thursday: the equivalent of $50 billion of 10-year notes. It didn’t help that this coincided with the Treasury Department selling $62 billion of seven-year notes, an auction that proved to be a disaster.

    The month ahead could be rocky, too. Back in April, the Federal Reserve tweaked its rules to exempt Treasuries from banks’ supplementary leverage ratios -- allowing them to expand their balance sheets with U.S. debt. But that relief ends March 31 and what happens next is something of a mystery.

    “It wasn’t an orderly selloff and certainly didn’t appear to be driven by any obvious fundamental continuation or extension of the reflation thesis,” wrote NatWest Markets strategist Blake Gwinn in a note to clients. A number of more technical factors were in the mix, against a backdrop of a good-old-fashioned buyers strike, he said.

    Article:
    chaotic-treasury-selloff
  • beebee
    edited February 27
    Government Bond Yields Have Surged, but Real Yields Are at Zero:
    Government bond yields have been rising steadily for the past three months, but they went parabolic in February. The yield on the 10-year Treasury touched 1.6% yesterday, up from 0.9% just a couple of months ago. That’s more than a two standard deviation move, suggesting the bond selloff may be overdone. Remember, bond yields rise as prices fall.

    Yields have jumped so much, in fact, that they’re giving stocks a serious run for their money. The 10-year yield is now higher than the S&P 500 dividend yield, which may have added to the selling pressure that cost stocks close to 2.5% yesterday.
    image

    Link:
    government-bond-yields-have-surged-but-real-yields-are-at-zero
  • edited February 27
    Just one view ...

    By Daily Insight Research - BCA Research (excerpt from Barron’s March 1, 2021 issue)

    “We recommend that multi-asset investors underweight bonds, especially Treasuries. We expect that the clamor for bigger government will contribute to a secular bear market that could rival the one that persisted from the 1950s to the 1980s. Within Treasury portfolios, we would maintain below-benchmark duration and favor Treasury inflation-protected securities over nominal bonds, at least until the Fed signals that its campaign to re-anchor inflation expectations higher has achieved its goal. Gold and/or other precious metals merit a place in portfolios as a hedge against rising inflation, and other real assets, from land to buildings to other resources, are worthy of consideration, as well.”

    (No link. I’m a Barron’s subscriber.)
  • @bee and @hank, thank you for the articles.

    If inflation remain less than the 2% target, what is the value of holding gold as a hedge against inflation?

  • @hank
    We expect that the clamor for bigger government will contribute to a secular bear market that could rival the one that persisted from the 1950s to the 1980s.
    Are they talking about a bear market in bonds? Or what?
  • edited February 27
    Thanks @WABC - Both equities and bonds I’d say. (Though my intent in posting was to emphasize the bond implications)

    “If inflation, big government, and organized labor come back from the dead, globalization loses ground, regulation expands ... tax rates rise and become more progressive, than the four-decade investment age that Reagan and Volcker helped launch may be on its last legs.”

    - Goodby Reagan and Volker
  • edited February 27
    Sven said:

    If inflation remain less than the 2% target, what is the value of holding gold as a hedge against inflation?

    @Sven - Also noticed the reference to gold in the cited passage. I have no idea what gold might do or whether one should own it. I’ve concluded that gold fits the definition of manic-depressive - being prone to extreme mood swings with little apparent reason.

    Likely the article cited was penned several days prior to being published. Over those few days gold’s price stumbled from around $1800 (start of week) to $1730 at yesterday’s close. The miners fell about 5% Thursday and another 3-4% Friday.

    IMHO - It’s too erratic to serve as a reliable inflation hedge. Those who promote buying gold seem to be of the belief that the Fed’s stimulative measures along with massive government spending will eventually lead to a cataclysmic fall in the dollar’s value.
  • hank said:

    Thanks @WABC - Both equities and bonds I’d say. (Though my intent in posting was to emphasize the bond implications)

    “If inflation, big government, and organized labor come back from the dead, globalization loses ground, regulation expands ... tax rates rise and become more progressive, than the four-decade investment age that Reagan and Volcker helped launch may be on its last legs.”

    - Goodby Reagan and Volker

    @Hank.

    Whoa. A lot to unpack there. But thanks for posting more.

    The amount of time I spend here seems to *mostly* coincide with MLB spring training, and my yearly rearrangement of the deck chairs in my IRA. So I'm not going to spend too much time getting into their analysis.

    But I hear the GOP wants to position itself as the workingman's party.

    I unloaded bonds for my own reasons.
  • I've read another interesting idea re: gold. Gold usually does well when it looks like inflation will show up but some are saying Bitcoin and Crypto currencies are stealing some of golds thunder.
  • edited February 27
    “Whoa. A lot to unpack there” - Not really. It’s just one of a half-dozen different market takes Barron’s typically presents from a variety of different sources in a small section of the magazine each week. More, I think, to give a flavor of the kinds of questions advisors are batting around (to borrow your spring training metaphor) than to provide any definitive or accurate point of view.

    “But I hear the GOP wants to position itself ... ” - OK


  • hank said:

    “Whoa. A lot to unpack there” - Not really. It’s just one of a half-dozen different market takes Barron’s typically presents from a variety of different sources in a small section of the magazine each week. More, I think, to give a flavor of the kinds of questions advisors are batting around (to borrow your spring training metaphor) than to provide any definitive or accurate point of view.

    “But I hear the GOP wants to position itself ... ” - OK

    Oh, I get that.

    Among other things I was thinking about putting Reagan and Volker in the same basket after packing the 50's and 60's into the same bear market as the 70's. And that whole four decade bull was pretty much treading water for 13-14 years after the dot com bust. At some point the market became Friedman's, and now seems to be a wholly owned subsidiary of the Fed.

    Took my brain a while to boil it down to a paragraph.

    Rest assured that my opinions are neither definitive nor accurate. ;-)

    Spring training game today. First Moderna shot on Monday morning.
  • @WABAC, you may want to review River Park Short Term High Yield, RPHYX. David has provided a detail analysis of the fund.
    https://mutualfundobserver.com/2017/05/riverpark-short-term-high-yield-fund-rphyxrphix/

    YTD return is +0.3% while vast majority of bond funds are in red for the year.
  • Sven said:

    @WABAC, you may want to review River Park Short Term High Yield, RPHYX. David has provided a detail analysis of the fund.
    https://mutualfundobserver.com/2017/05/riverpark-short-term-high-yield-fund-rphyxrphix/

    YTD return is +0.3% while vast majority of bond funds are in red for the year.

    Thanks for the tip. I did read your link. And I did look into RPHYX on other sources.

    I like the duration. The ER is too high for me to get into a B-rated bond fund. I don't think anything could get me into a B-rated fund.
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