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European bond collapse
Posted: Sun Jun 07, 2015 10:54 am
by European Son
My first venture into the European bond market has not gone well. I am down about 20% in 2 months, in what was supposed to be allocation to a quality bond holding. I would understand if it was a leveraged product, but its not (IBGL; its a long bond ETF).
I know its wrong to try and time the market, but this has put me off bonds for a long time.
Re: European bond collapse
Posted: Sun Jun 07, 2015 11:37 am
by MachineGhost
It sucks, but remember that the principal is guaranteed as long as you hold to maturity. So don't panic and sell.
I do question if the PP will work without using the world's reserve currency for the cash and T-Bonds. Flight to safety is a critical component of the PP working. The USA is Rome for better or for worse.
Re: European bond collapse
Posted: Thu Jun 11, 2015 7:49 pm
by MediumTex
MachineGhost wrote:
It sucks, but remember that the principal is guaranteed as long as you hold to maturity. So don't panic and sell.
I do question if the PP will work without using the world's reserve currency for the cash and T-Bonds. Flight to safety is a critical component of the PP working. The USA is Rome for better or for worse.
Based upon current interest rates, it would appear to me that the German bund has been more of a flight to safety than U.S. treasuries.
Re: European bond collapse
Posted: Fri Jun 12, 2015 3:48 am
by Introvert
European Son wrote:
My first venture into the European bond market has not gone well. I am down about 20% in 2 months, in what was supposed to be allocation to a quality bond holding. I would understand if it was a leveraged product, but its not (IBGL; its a long bond ETF).
I know its wrong to try and time the market, but this has put me off bonds for a long time.
You bought exactly when bonds hit their maximum. In the long run it shouldn't matter as you should have other asset classes and should rebalance at least once a year. So next time you buy bonds, they won't be so highly valued.
Re: European bond collapse
Posted: Fri Jun 12, 2015 11:08 am
by European Son
That is my strategy, buy more at the lower price. As they say...... I got a fever, and the only solution is more cowbell.
My point is, as a European proxy for TLT in the PP, the AAA / AA ratter, northern Europe only, Govt bond ETF is very volatile.
Imagine if you bought TLT 2 months back, and it fell 20%. There would be riots in the street.
Re: European bond collapse
Posted: Fri Jun 12, 2015 12:26 pm
by MachineGhost
European Son wrote:
Imagine if you bought TLT 2 months back, and it fell 20%. There would be riots in the street.
It has fallen almost that much in 6 months.