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Gently Reaching For Yield

Many here use bonds to get a POSITIVE real yield. As Bogleheads we use bonds for defense (ballast). But having a NEGATIVE real portfolio yield drives me CRAZY. So I'm thinking that I could at least reach for yield to get our port to a real yield = 0%. Right now it's -0.33%.

Currently 20% of port is in US Treasuries (yield = 0.50%) and 20% of port is in USD Corp Bonds (yield = 2.70%). To get to a real portfolio yield of 0% we'd need to increase corp bonds to 35% and reduce our US Treas to 5% of port.

Another consideration is to use EM bonds which yield double what our corp bonds yield. We could use 5% EM + 25% corp bonds + 10% US Treas. to get very close to 0% (-0.04%).

Of course my concern is that EM and corp bonds got slaughtered recently with this latest BEAR. Our US Treas and TIPs did their defensive job of going UP in NAV when our stocks and corp bonds got hammered.

 

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Re: Gently Reaching For Yield

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Re: Gently Reaching For Yield

Doesn't BND or BIV have a positive yield?

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Re: Gently Reaching For Yield

BND's REAL SEC Yield is NEGATIVE: 1.49% - 2.04% = -0.55%

Note. USD CPI 3 yr CAGR = 2.04%. USD CPI 10 yr CAGR = 1.65%. 

 

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Re: Gently Reaching For Yield

30 day SEC yield means nothing but a mathematical exercise. The TTM yield is a better indication of what you will be paid. In that case BND is positive. 

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Re: Gently Reaching For Yield

For bonds I use the one that is LOWER. TTM vs YTM. For equities I use TTM.

There is no reported SEC Yield on non-USA domiciled ETFs.

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Re: Gently Reaching For Yield


@Gary1952 wrote:

Doesn't BND or BIV have a positive yield?


BND has positive yield FOR NOW... as time goes on the maturing bonds will be replaced with lower yielding bonds so the SEC yield will be on a glide path lower as you know.

I personally got rid of all IT bond funds from my portfolio. Cash is my bonds.

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Re: Gently Reaching For Yield

I will ride IT until it fails. Cash is definitely negative real return.


@SteadyEddy wrote:

@Gary1952 wrote:

Doesn't BND or BIV have a positive yield?


BND has positive yield FOR NOW... as time goes on the maturing bonds will be replaced with lower yielding bonds so the SEC yield will be on a glide path lower as you know.

I personally got rid of all IT bond funds from my portfolio. Cash is my bonds.


 

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Re: Gently Reaching For Yield


@Gary1952 wrote:

I will ride IT until it fails. Cash is definitely negative real return.


@SteadyEddy wrote:

@Gary1952 wrote:

Doesn't BND or BIV have a positive yield?


BND has positive yield FOR NOW... as time goes on the maturing bonds will be replaced with lower yielding bonds so the SEC yield will be on a glide path lower as you know.

I personally got rid of all IT bond funds from my portfolio. Cash is my bonds.


 


That works. Plus if the Fed is forced to go to negative rates, you might get NAV appreciation in IT bonds as well.

 

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Re: Gently Reaching For Yield

BAGIX has done 3% for me in a couple of months (knock on wood).

The thought of another March gives me a stomach ache. ;-)


@SteadyEddy wrote:

@Gary1952 wrote:

I will ride IT until it fails. Cash is definitely negative real return.


@SteadyEddy wrote:

@Gary1952 wrote:

Doesn't BND or BIV have a positive yield?


BND has positive yield FOR NOW... as time goes on the maturing bonds will be replaced with lower yielding bonds so the SEC yield will be on a glide path lower as you know.

I personally got rid of all IT bond funds from my portfolio. Cash is my bonds.


 


That works. Plus if the Fed is forced to go to negative rates, you might get NAV appreciation in IT bonds as well.

 


 

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Re: Gently Reaching For Yield

During April, I've increased my LT Treasuries and reduced my IT corporate bond exposure.  I'd expect that in case of a downturn, a flight to safety should cause LT Treasuries prices to go up a few percent, corporate bonds might hold but are unlikely to gain. And, if the downturn is bad enough, the Fed will lower interest rates into negative territory, which should boost LT Treasuries another few percent.  If there is no downturn, I will switch a portion back into BIV, but my losses (or foregone gains) are unlikely to be much.  I will get creamed if interest rates go up, but that is a risk I will take.

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Frequent Contributor

Re: Gently Reaching For Yield


@Gary1952 wrote:

30 day SEC yield means nothing but a mathematical exercise. The TTM yield is a better indication of what you will be paid. In that case BND is positive. 


Gary, why do you think looking back one year is better indicator than projecting forward one year?  Don't investors typically act on forward projections (where they think we are going) than where we have been?  
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Re: Gently Reaching For Yield


@PaulR888 wrote:

@Gary1952 wrote:

30 day SEC yield means nothing but a mathematical exercise. The TTM yield is a better indication of what you will be paid. In that case BND is positive. 


Gary, why do you think looking back one year is better indicator than projecting forward one year?  Don't investors typically act on forward projections (where they think we are going) than where we have been?  

You do both whenever you hold bonds, or bond funds, for the interest and distributions you expect to receive from them, not for portfolio ballast.  On the other hand, looking at the past and projecting forward bond prices or bond fund NAVs has nothing to do with gently reaching for yield whenever you are projecting capital gains or losses.

De gustibus non disputandum est,
Quot homines tot sententiæ
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Re: Gently Reaching For Yield


@Gary1952 wrote:

BAGIX has done 3% for me in a couple of months (knock on wood).

The thought of another March gives me a stomach ache. ;-)


@SteadyEddy wrote:

@Gary1952 wrote:

I will ride IT until it fails. Cash is definitely negative real return.


@SteadyEddy wrote:

@Gary1952 wrote:

Doesn't BND or BIV have a positive yield?


BND has positive yield FOR NOW... as time goes on the maturing bonds will be replaced with lower yielding bonds so the SEC yield will be on a glide path lower as you know.

I personally got rid of all IT bond funds from my portfolio. Cash is my bonds.


 


That works. Plus if the Fed is forced to go to negative rates, you might get NAV appreciation in IT bonds as well.

 


 


Why would the fed be forced to go to negative rates which would hurt savers and retirees as well as banks who would have to curtail lending to maintain minimum reserves required under fed rules? Negative rates would not do much to increase spending by consumers because savings rate in US is only 7.6%  compared to Japan where the savings rate is 17%.  And you do realize that congress could swiftly pass legislation to prohibit the fed from imposing negative rates.To protect savers and retires from the harsh effects of negative rates?. 

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Frequent Contributor

Re: Gently Reaching For Yield

Hi NotEinstein ...

Great closing:

De gustibus non disputandum est   

The latin takes me back to my Jesuit high school days.  Of taste, there is no disputing

How apropos.

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Re: Gently Reaching For Yield


@PaulR888 wrote:

Hi NotEinstein ...

Great closing:

De gustibus non disputandum est   

The latin takes me back to my Jesuit high school days.  Of taste, there is no disputing

How apropos.


There is also no debating opinions!

De gustibus non disputandum est,
Quot homines tot sententiæ
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Frequent Contributor

Re: Gently Reaching For Yield

Agree.

Nulla disputatio sententiae.   

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Re: Gently Reaching For Yield


@PaulR888 wrote:

Agree.

Nulla disputatio sententiae.   


I wasn't Jesuit, furtunately!

‘quot homines tot sententiæ’

https://wordhistories.net/2018/11/25/quot-homines-tot-sententiae/

De gustibus non disputandum est,
Quot homines tot sententiæ
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Re: Gently Reaching For Yield

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Re: Gently Reaching For Yield


@galeno wrote:

For bonds I use the one that is LOWER. TTM vs YTM. For equities I use TTM.

There is no reported SEC Yield on non-USA domiciled ETFs.


Hi Galeno,

YTM is the total return of the individual bond if purchased at the current price and redeemed at par. A call date can affect YTM. Since bond funds typically do not mature, the "redeemed (at par) value" is not known until the fund is sold.

Fidelity is hosting a webinar for individual bond investors.

 The webinar targets high-net-worth individuals, but I think it might be helpful to have the larger than myself picture, and it scale back from there.  If you can resign yourself to the low current yields in the bond market, then a hold-to-maturity slice in your bond allocation might make sense.

It is difficult to gently reach for yield when credit spreads are narrow, and the term premium is basically flat.

Holiday

 

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