The Briefing Room
General Category => Economy/Business => Topic started by: catfish1957 on February 25, 2021, 04:40:07 pm
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(https://mk0capitalmind1w5wn3.kinstacdn.com/wp-content/uploads/2016/07/Bonds_listings_in__3125526b.jpg)
https://www.marketwatch.com/story/some-investors-face-colossal-losses-on-u-s-treasury-bonds-as-yields-surge-11614185408?cx_testId=22&cx_testVariant=cx_1&cx_artPos=0&mod=home-page-cx#cxrecs_s (https://www.marketwatch.com/story/some-investors-face-colossal-losses-on-u-s-treasury-bonds-as-yields-surge-11614185408?cx_testId=22&cx_testVariant=cx_1&cx_artPos=0&mod=home-page-cx#cxrecs_s)
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The multidecade-long bull market in Treasurys has delivered rich gains to patient investors, but a 2021 bond-market selloff is likely inflicting significant pain on some market participants.
Though many were expecting yields to rise this year as the reflation narrative gained ground, few were prepared for the rapid rise in long-term bond yields since the start of this year. Yields move in the opposite direction of bond prices.
That’s been matched by the surge in long-term Treasury yields. The 30-year bond rate, 2.295% is at 2.27%, up around 63 basis points since the start of the year.
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If you remember last year, I mentioned how insane it was for anyone to invest in long bonds priced at 1.6%. If you knew anyone who did, make sure you get their children to invoke their fidicuary POA over them.
OTOH, there are many of us drooling at how far this bond (rate) rally (or crash if that is your perspective) will go. My last significant plunge in the 30 years realm, I was happy with 5.5%, which I have enjoyed for many years. With Biden's financail plan, inflation is almost a certainty. Will we see 5-6% again in the long bonds? All depends on how much a kick in the nuts Biden-mania takes us.
6% is my trigger point at this time, which might correspond with some decent 7-8% Corporate ones.
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Pretty predictable this would happen. One reason I have only done short term bonds.
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Why is this news? Bond prices and interest rates have an inverse relationship. That's the known risk. No investment is "safe". Money market funds "broke the buck" in 2008. Prior, money market funds were thought to be "safe" investments.
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Why is this news?
@DefiantMassRINO
When a mainstream investment instrument triples (or 1/3rd's depending on your investive perspective in the 10 Year bond) in a period in 8 months, there are many who might find this level of bond gyration.... "Newsy" . If you can't understand that, then I can't help you.
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Why is this news? Bond prices and interest rates have an inverse relationship. That's the known risk.
It is impossible to predict interest rates when the Fed continues to print up an extra trillion here and an extra trillion there. Without that, interest rates would be over 20%.