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@AndyJ, I was responding your comment while commenting on a broader context. Sorry that I should have link to your earlier post. In the last few months, the 1 and 2 yr treasury’s have been volatile, especially in March with the SVB and Signature. There was only 2 days when 2 yr Treasury went over 5.0% in March and it stays below that ever since.
The inverted yield curve makes prediction challenging beyond 2 years. As for fixed income investing, I like these bond funds: Vanguard short term treasury index, ETF, VGSH, Avg effective maturities -2.0 years, 30 days SEC yield - 4.43%.
Taking on a bit more on credit risk, Vanguard short term corporate index, ETF, VCSH. Avg effective maturities - 3.0 yr, 30 days SEC yield - 5.22%.
I like your approach for potential cap gain for longer duration bond finds such as BND and BOND. Since the beginning of this year, I have invested back into BND and DODIX on dollar cost verage basis. If the FED is near the end of rate hike, bonds in general will do okay. If the FED starts to cut rate, the intermediate-term bonds will be in good position to have good capital gain.
@Sven, VGSH and SHY, which I track, look to be essentially identical. They could really do well if/when a recession looks imminent and short rates start fo fall.
@AndyJ, the inverted yield curve is dictated by investors who want to get paid in the near term due to the deteriorating economy. Historically it has been a remarkable reliable indicator for the coming recession. Questions are when, severity and duration since every recession is different given their particular situation. Many have suggested this one may be mild and short live, and it may be much better than that of 2008.
FED minutes have suggested they anticipate a recession and they are ready to act (i.e. cut rates) just like they did on March 23, 2020. At that time I invested in BND and it took off nicely for rest of 2020. Many junk bonds fell like stocks and recovered much later. Treasury’s hardly decline and finish the year nicely. I expect VGSH and SHY will do well. So credit quality really made a difference.
The two analysts think there may be another round of rate hike in summer with the high employment rate while other indicators are showing slowing economy.
The two analysts think there may be another round of rate hike in summer with the high employment rate while other indicators are showing slowing economy.
Think the market is pre-mature to think the FED will pause and pivot right away this year. Strong labor market is counteracting other data indicating a slowing inflation. FED is expecting a mild recession or soft landing.
I believe them. It will be quite a while before rates come down. But... Is no one asking whether the way unemployment is measured is still accurate for their needs? Is the tool telling them really what they WANT to see? Is the metric itself providing USEFUL information? I think both Parties have mucked around with that, back and forth. Part-timers are counted, too.
If a person picks up 2 jobs is that counted as +2 for non farm payrolls and unemployment rate? I heard that recently and @crash your comments refreshed that thought and its implications
That's a particularly good RY; all four guests were right out there with their opinions on how to play the current situation, no on the one hand this, on the other that, kind of talk.
Continuing focus on the short end of the T market, a little extra duration, and agency MBS all make sense from the perpective of inflation hawkishness still the Fed approach, but getting closer to the end.
Only thing I don't get about it is that actual recent headline inflation is only 3.2% (3m and 6m both), and the big round of Fed rate rises hasn't anywhere near made it fully through the system yet. Per Krugman's recent columns, a 2% target is a made up number with little real basis, and 3% may be more sensible looking ahead to the next downturn.
Banging the drum for IG and Treasuries. Contopoulos suggests a barbell. Landmann sees "compelling value" in Tips. And mortgage paper. "A screaming buy." ----TCW.
Here's the 6/30 Real Yield -- a divergence in views about the direction of intermediate/long Treasuries and how big a deal the apparent rolling over of several econ measures is.
@Crash, looks like that was the 6/23 program you posted last. (It was a good one for anyone who missed it.)
Here's the 6/30 Real Yield -- a divergence in views about the direction of intermediate/long Treasuries and how big a deal the apparent rolling over of several econ measures is.
@Crash, looks like that was the 6/23 program you posted last. (It was a good one for anyone who missed it.)
Oh, dear. I'm losing my marbles. Thanks for posting the one I THOUGHT I posted!
Comments
The inverted yield curve makes prediction challenging beyond 2 years. As for fixed income investing, I like these bond funds:
Vanguard short term treasury index, ETF, VGSH, Avg effective maturities -2.0 years, 30 days SEC yield - 4.43%.
Taking on a bit more on credit risk,
Vanguard short term corporate index, ETF, VCSH. Avg effective maturities - 3.0 yr, 30 days SEC yield - 5.22%.
I like your approach for potential cap gain for longer duration bond finds such as BND and BOND. Since the beginning of this year, I have invested back into BND and DODIX on dollar cost verage basis. If the FED is near the end of rate hike, bonds in general will do okay. If the FED starts to cut rate, the intermediate-term bonds will be in good position to have good capital gain.
FED minutes have suggested they anticipate a recession and they are ready to act (i.e. cut rates) just like they did on March 23, 2020. At that time I invested in BND and it took off nicely for rest of 2020. Many junk bonds fell like stocks and recovered much later. Treasury’s hardly decline and finish the year nicely. I expect VGSH and SHY will do well. So credit quality really made a difference.
None of the "quick yes or no" questions at the end, this time. I do hope it's gone for good.
Good focus this time toward expectations out a ways in time, especially for the credit market.
https://www.bloomberg.com/real-yield
BB loans - that was a surprise.
P.S. I'm watching the 1y and 2y Treasury yields and hoping they last till the next auctions.
https://www.bloomberg.com/news/videos/2023-06-02/-bloomberg-real-yield-06-02-2023-video
https://www.bloomberg.com/news/videos/2023-06-23/-bloomberg-real-yield-06-23-2023-video
Continuing focus on the short end of the T market, a little extra duration, and agency MBS all make sense from the perpective of inflation hawkishness still the Fed approach, but getting closer to the end.
Only thing I don't get about it is that actual recent headline inflation is only 3.2% (3m and 6m both), and the big round of Fed rate rises hasn't anywhere near made it fully through the system yet. Per Krugman's recent columns, a 2% target is a made up number with little real basis, and 3% may be more sensible looking ahead to the next downturn.
Banging the drum for IG and Treasuries. Contopoulos suggests a barbell.
Landmann sees "compelling value" in Tips.
And mortgage paper. "A screaming buy." ----TCW.
@Crash, looks like that was the 6/23 program you posted last. (It was a good one for anyone who missed it.)
https://www.bloomberg.com/news/videos/2023-07-14/-bloomberg-real-yield-07-14-2023
https://www.bloomberg.com/news/videos/2023-07-21/bloomberg-real-yield-07-21-23
https://www.bloomberg.com/news/videos/2023-07-28/bloomberg-real-yield-07-28-23