Current Yields
10-Year: 3.37%
20-Year: 3.76%
30-Year: 3.53%
The 20-year Treasury bond currently yields a whopping 0.31% more than the average of the 10-year and 30-year Treasury bonds. How likely is that rational?
You could use rational arguments to convince me to sell TLT and take my losses, but don't you dare tell me to sell 20-year Treasury bonds and buy 10-year and 30-year Treasury bonds instead, while simultaneously p$*sing down my back while claiming it's raining. No sir, of all the bonds I'd think about selling right now, the 20-year Treasury bond would be near the very bottom of the list. But hey, maybe that's just me.
The great missed opportunity was not issuing more than 50% of bonds as 30-year during 2020 and 2021. Our government is not led by people who exercise forethought (or understand logistics, for that matter).
ReplyDeleteThere’s at least one person in government who exercised forethought. The people responsible for drastically reducing the amount of I-Bonds we can buy in a given year are either very smart or very lucky. And since they chose to do it in December of 2007, the very month the Great Recession began, I’m going to say very smart.
ReplyDeletehttp://illusionofprosperity.blogspot.com/2007/12/extremely-bad-news-for-i-bonds.html?m=1
That said, if they were all that smart I probably wouldn’t have a blog. I’m talking about you, Ben “There Is No Housing Bubble to Go Bust” Bernanke. ;)
If I’m going to buy bonds for current income and potential appreciation (if rates drop due to a future recession), then I’m definitely sticking with longer duration such as TLT.
ReplyDeleteI definitely didn’t buy any IEF.
If I’m wrong, then I’m also willing to hold TLT long-term at these interest rate as part of my income portfolio.
Yeah, perhaps same smart person made the Series EE electronic only, non-marketable.
ReplyDeleteGreat Unknown,
ReplyDeleteThe only other bond that is tempting me right now is the 20-year 1.36% TIPS, but I own enough inflation-protected bonds already. I’m staying the course on TLT. If we are heading into a recession within the next year or so, seems like a reasonable plan.
I do not believe for a second that this economy can tolerate 1.36% real yields for the next 20 years. The only real question is how best to play it. Locking that rate in would certainly let me sleep well at night no matter what happened. Well, barring hyperinflation or outright default, of course.
I would love to be wrong about the economy’s ability to tolerate higher real yields long-term. I have bonds maturing in the coming years (far more than my TLT investment), and as a saver, that would be ideal. Not a bad position to be in. Bracing for being right, but hoping for being wrong.
I have never rooted for lower long-term real yields. Not starting now. So bring on the temporary higher real yield pain, Powell. Bring. It. On. :)
Who Struck John,
ReplyDeleteLooks like I will need to cash out some I-Bonds this year to cover some expenses. Since their real yields are now less than similarly dated TIPS bonds, I’m thankful that they are not marketable, Don’t need to find a greater fool, lol.
Of course, there was a time when even 0.0% I-Bonds had a higher yield than the market was offering. Wished they were marketable then! Greater fools were abundant.
Live by the savings bond rules, die by the savings bond rules. :)
The 20-year TIPS ticked higher to 1.41% after today’s hot CPI.
ReplyDeleteMarket doesn’t believe stagflation will persist, or investors would be flooding into that bond (driving its yield lower, not higher).
Then again, this is the same market that now believes a 1.41% real yield is sustainable for 20-years, even though my online savings account is still only paying 0.30% with inflation running so hot. (I’d move more money out of it, but there’s less than $2 left.)
I’m holding cash now in my high-yield online savings account so I can buy my next slug of I-bonds in January. It’s the only thing that seems to be working right now (other than TBT…ouch)
ReplyDeleteTLT is seemingly filled with F-Bombs, but that may change soon, if the period of abundance is truly over.
ReplyDeletehttps://themarket.ch/interview/the-period-of-abundance-is-over-ld.7369
Gundlach sure is preaching to the illusionary prosperity choir. I have the faith. Amen, lol. Sigh.