D1984 wrote:
Bottom line, as long as even five year T-notes offer less than 1%, I'm sticking (in taxable accounts...for nontaxable it's the 401Ks stable value fund) mostly with savings accounts and rewards checking (all under FDIC and in fact under $25K per account) that offer anywhere from 0.80% to 3.00% with a duration of basically zero. When rates rise to maybe 2% across the 1-5 year ladder then perhaps I'll get back fully into STTs again.
That's a good point. Savings and MMSA rates have been rising with the top rate now 1% or slightly above. I haven't compared to CD's or Treasurys but I imagine they are lower.
P.S. where are you getting four year rates from (for the first year of your ladder...after that the five year becomes a four year and so on)...I'm having to extrapolate based on 3-year and 5-year yields?
3-year CMT Treasury = 5-year ladder. Duration is virtually the same.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
sophie wrote:
So I'm not dissuaded from the PP even in this nightmare scenario, although if long term bond rates get down to 1-1.5% I suspect there would be a lot of discussion about switching the bond allocation to cash or least intermediate term bonds.
My rough internal tripwire for LT bonds is around 2% or less. At that point I'm going to want to re-analyze the situation.
As for the cash buffer in a tight month recession. There will likely be nowhere to hide. I generally recommend that people hold around a year or two of living expenses and then optionally they can extend maturities to the 1-3 year range if they feel like. This is because you want the ability to wait out any drops in NAV of a fund so your cash in near term can buffer you until you need to tap the 1-3 year reserves. But this situation is likely only applicable to someone retired and, this is totally optional.
I have noticed at times that the 1-3 year range is very much a sweet spot in terms of how the market prices the asset as a cash substitute vs. going shorter. They are demanding more in interest due to the uncertainty, but it's not so far out on the time horizon that it gets really foggy like 5+ year notes/bonds.
Of course during a huge deflationary shock all bets are off. You better have LT bonds in the portfolio.
I know that Craig made a surprising re-appearance within the last month. And, this event has happened? "LT bonds is around 2% or less" If so, I don't remember him addressing during that brief time when he was back?
vinny wrote:
I know that Craig made a surprising re-appearance within the last month. And, this event has happened? "LT bonds is around 2% or less" If so, I don't remember him addressing during that brief time when he was back?
vinny wrote:
I know that Craig made a surprising re-appearance within the last month. And, this event has happened? "LT bonds is around 2% or less" If so, I don't remember him addressing during that brief time when he was back?
