TLT Negative YTD

Discussion of the Bond portion of the Permanent Portfolio

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barrett
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Re: TLT Negative YTD

Post by barrett » Tue May 12, 2015 10:40 am

This is the last part of the article that Reub linked to:

"Stocks jumped overnight after China cut interest rates for the third time in six months on Sunday to try to stoke a sputtering economy that is headed for its worst year in a quarter-century.
   
The People's Bank of China said on its website that it was lowering its benchmark, one-year lending rate by 25 basis points to 5.1 percent from May 11. It cut the benchmark deposit rate by the same amount to 2.25 percent."

So Europe bounces off its bond lows while China seems headed for lower growth. The economy is global and there seem to be different signals coming to us from either side of the US.
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mathjak107
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Re: TLT Negative YTD

Post by mathjak107 » Sat Jun 27, 2015 5:16 am

Desert wrote: I'm hoping rates continue to rise, with inflation remaining low.  It does lead to short-term pain, but I don't see how any of us will get decent real rates of return with present low yields.
with the PP using  long term treasury's ,  loses are magnified compared to total bond funds or a popular intermediate term etf like AGG.

you can see a 20-30% loss with just a 1% rise .
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Desert
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Re: TLT Negative YTD

Post by Desert » Sat Jun 27, 2015 4:45 pm

mathjak107 wrote:
Desert wrote: I'm hoping rates continue to rise, with inflation remaining low.  It does lead to short-term pain, but I don't see how any of us will get decent real rates of return with present low yields.
with the PP using  long term treasury's ,  loses are magnified compared to total bond funds or a popular intermediate term etf like AGG.

you can see a 20-30% loss with just a 1% rise .
Definitely.  For those using TLT, the duration is currently around 17 years.  So a 1% rise in long rates would cause a ~17% drop in price.  The longer duration of LTT in recent years is a factor that isn't discussed a lot.  In HB's days, the long bond duration was a good bit shorter (due to higher yields).  25% LTT these days provides a lot more volatility than it did back then. 
Our greatest fear should not be of failure, but of succeeding at something that doesn't really matter. 
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