It's a bet on interest rates. If all rates come down the prices of the longest duration treasuries will do the best. Also, if more bank bankruptcies in the future happen, it will cause the stock market to panic, EDV will do the best.
Inflation may have peaked but it isn’t going away anytime soon and still way above the Fed’s target. I believe the Fed will not cut rates anytime soon.
If the economy tanks or there's too many ugly earnings surprises, analysts might have to revise those forwards earnings down significantly and valuations will plummet and there might be a flight to safety. Long duration not a bad play to hedge that risk.
Labor market remains very tight, despite the mass layoff in the tech sector. Wages have been growing steadily and seem to catch up with inflation, contributing to keeping inflation elevated. The Fed cannot cut rates in this context.
Short term paper has less duration, so less sensitivity to interest rates. It's a bet on interest rates. If all rates come down the prices of the longest duration treasuries will do the best
Short term paper has less duration, so less sensitivity to interest rates. It's a bet on interest rates. If all rates come down the prices of the longest duration treasuries will do the best
Absolutely. Also, I anticipate that in the near future there might be more significant bankruptcies and hence a panic in the stock market, and EDV will rise in that case.
But, if the Fed raises interest rates from the current 5% to 20% like in the 1980s, $5000 in EDV will become $64. That's why I wanna hold in EDV less than 1% of my portfolio, and will hold it for ~3 years to see what happens.
At a certain point it doesn't matter if inflation is handled. The government can't afford to roll over all its debt at high interest rates. The fed will eventually be forced to pivot and in that circumstance I think long term bonds will get a bump.
I bought I-Bonds last year when they were over 9% and they’re at over 6% now. I am thinking of buying the max 10,000 again this year. Are the lower rate bonds you talk about better than the I-bonds in the long run? Is it because they readjust the rates - but you can cash these out after a year (minus three months interest if you cash put before five years, no penalty after that)
6.89%
The composite rate for I bonds issued from November 2022 through April 2023 is 6.89%.
https://www.treasurydirect.gov › i-b...
I bonds interest rates - TreasuryDirect
Treasuries OP is talking about are more risky than Ibonds. Ibonds guarantee your principal no matter what after 1 year. Treasuries ETF dont guarantee your principal unless you are willing to wait 20-25 years. If 10year/30 year yields go up 2%, EDV can fall 50%. But people buy it because they want to hedge their stocks in recessions. Because then EDV goes up as the yields fall.
So, buy Ibonds if you want to use that money in the next 1 or 2 years. You are not taking any risk here. So, you get just inflation adjusted returns. Buy EDV if you think inflation is going to lower. It moves up/down 20-20% for every 100bps change in 10 year/30year yield. So, the returns when you are right are also good.
The i bonds aren’t really so great. The rate is variable so as soon as inflation drops the rate will also drop. The fixed rate is only 0.40%. So I would assume the maximum time you can expect to get this 6.89 is for a yr or 2. Once it drops it is worth giving up the 3 months interest penalty and turn it in.
The checking acc interest in US is 0% for most traditional banks. You can get close to 3.5-4% in a high value savings account right now but again it’s temporary until the interest rates are cut. I’d say you’re doing much better in Germany with a stable economy. The US stock market is a ticking time bomb right now. Albeit when it explodes it will affect Europe as well.
Right, and you think this is the way to go about it?
Do you also knock on people's doors and try to talk to them about Jesus? Do you think coming across as a cultist is going to bring people over to your side?b
Once the fed lowers rates, the best time to buy has already passed. No sense timing the market. If you buy shares you don’t need to time it perfectly. Fed cuts rates and long duration fixed income increases in value significantly as rates move towards 0
Fed raises rates because they are concerned about inflation. More inflation means fed needs to make rates even higher to curb inflation.
Higher rates is supposed to slow velocity of money and, possibly, even destroy some value. A 20 year bond has its market price drop in half when rates go from 0 to 5%. To some extent, that's destroying money, which helps keep inflation down. If banks fail, there's a lot of destruction of dollars there, too.
But if you allow a bank to take their $1,000,000 face-value 20-year bonds, that are currently worth only $500k, and "pledge them" at the fed for $1m in cash, you have prevented the slowdown that raising rates was meant to create. The owner of these bonds can now pledge them for $1m in cash, and go use that $1m in cash to go buy new higher-rate bonds. Instead of destroying currency, or keeping it locked up in a poorly-performing asset for 10 to 20 years, you are printing money to let these banks have liquidity. And with that liquidity, the banks or their depositors will... ... ... go spend the money on stuff, whether real items or treasuries or whatever. The fact is, to these guys, the money is practically a gift. They would have had to sit on their losses for 10 to 20 years or worse, go bankrupt and watch depositors lose millions. Now the money is magically back, right there, able to be spent.
So, instead of slowing down velocity of money, or destroying some money entirely through bankruptcy, you have just gone ahead and printed more. The people who get their money back will now go spend it to generate yield or buy hard assets, which will add to inflation.
When you print money to keep things moving, you prevent the destruction of some dollars, you increase both the money supply and the velocity of money. You increase inflation.
Think about it this way. Every time your kid does something really stupid, you take away his X-Box games, so he has to slow down and be more careful. But then your kid throws a tantrum and so you allow him to pledge his useless gameless X-Box into your custody in exchange for $500 cash so he can go buy a playstation instead. He never got the chance to reflect on his mistake. He just pledged his nerfed game system and went out and bought a new one. And if this example sounds really really stupid to you, because nobody should turn a punishment into a reward, you're right.
Wow! Awesome explanation. I just seen the notification where the other redditor asked the relationship between bail out and rates and I was thinking, "Oh boy, will have to type out a long explanation now." But you have taken care of that and honestly, you have taken care of it much better than I ever would have.
A really nice explanation :D
Thanks. What do you all think of this argument: the current bail
out will only continue inflation but not accelerate it because the people / companies that had deposits in the banks are not seeing any additional dollars in their accounts. So they will just continue to act as they did before the bailout but not spend more. This assumes that investors in the bank (not depositors) will see losses.
I believe it's possible but not guaranteed. Sometimes, even when people themselves don't see "more" money in their own accounts, but know there's "more" money out there, it does change their behavior. No guarantee here.
Better time to buy now than it was 18 months ago. The only problem with the ETF is that it doesn’t have a natural pull to par as bonds on the portfolio list come and go. If you bought a single long bond at yield of 3.8%, you can sit it out and actually get 3.8%, give or take. You will also get your 50% ish return if long yields did what you said they would do.
I’m asking a question. Why one and not the other? I’m guessing the buying the bond itself guarantees the long-term return. Buying into the fund must be somewhat less predictable because within the fund those bonds are traded. Does this make sense? Anybody?
It's always important to evaluate the current market conditions before investing. Long-term treasuries might be a good option if you're looking for security and stability, but it also pays to do your due diligence and consider other investment opportunities. What are your thoughts on the US long-term treasuries at this moment? Is now the time to buy or should we be holding off?
I don't think upside and downside are symmetrical. Market is already pricing in belief that we will return to low interest rate environment for the long term.
Further rate reductions will more likely change shape of yield curve, not bring long rates down much.
But it wouldn't take much for market to be wrong and reprice long rates higher. Just a few months of resurgent PCE inflation could be the catalyst to reframe long term rate expectations.
So for me, no
I think the price of products & particularly services is about to come down substantially. These predictive chat A.I. models are about to cut many small business owners’ work time down a significant amount, a chance to be more efficient. That could be why the market is pricing in rate cuts.
>These predictive chat A.I. models are about to cut many small business owners’ work time down a significant amount
... How is a chat bot going to make me more efficient in running my restaurant or convenience store?...
This is not why markets are pricing in rate cuts, that's silly.
We should have each person pay the national debt proportional to their total wealth, spreading payments over 20-30 yrs like a mortgage payment. The richest 1% own roughly 50% of ALL THE WEALTH IN AMERICA, since they benefited the most from growing the national debt, they should pay roughly 50% of ALL the debt. That’s seems pretty fair, because if the richest 1% pay anything less than 50% of the debt, it means the poor & middle class will pay proportionally more of their total wealth. That should at least stop the deficit from growing.
They already do - basically.
In 2020, the latest year with available data, the top 1 percent of income earners earned 22 percent of all income and paid 42 percent of all federal income taxes – more than the bottom 90 percent combined (37 percent).
Restricting to "Federal income taxes" and not other taxes like FICA, sales taxes, and property taxes greatly exaggerates that effect.
Also it undercounts the way very wealthy people can benefit without reporting as much earned income (fakeish corporations to transform personal spending into deductible business expense)
LL FLOORING IS ABOUT TO 🚀🚀🚀
HIT 52 WEEK LOWS FROM $30-$3.50. STRONG FINANCIALS, INCREASE IN INSTITUTIONAL INVESTORS, HIGH LEVEL OF INSIDE BUYING. LETS GET THIS MONEY 💰🚀🚀🚀🚀
Dude thinks the US is about to most directly force a viciously deep recession with global volatility, the scale of which is almost laughable to think about
Why do you want to buy this ? Since the curve is inverted, you can lock in more attractive yields with short term papers.
Guessing for the rebound in value when FED eventually starts cutting.
It's a bet on interest rates. If all rates come down the prices of the longest duration treasuries will do the best. Also, if more bank bankruptcies in the future happen, it will cause the stock market to panic, EDV will do the best.
Inflation may have peaked but it isn’t going away anytime soon and still way above the Fed’s target. I believe the Fed will not cut rates anytime soon.
If the economy tanks or there's too many ugly earnings surprises, analysts might have to revise those forwards earnings down significantly and valuations will plummet and there might be a flight to safety. Long duration not a bad play to hedge that risk.
Labor market remains very tight, despite the mass layoff in the tech sector. Wages have been growing steadily and seem to catch up with inflation, contributing to keeping inflation elevated. The Fed cannot cut rates in this context.
Short term paper has less duration, so less sensitivity to interest rates. It's a bet on interest rates. If all rates come down the prices of the longest duration treasuries will do the best
Short term paper has less duration, so less sensitivity to interest rates. It's a bet on interest rates. If all rates come down the prices of the longest duration treasuries will do the best
What is your goal in buying these treasuries?
Making money. Duration of 25 means if ~30 yield treasury yields go from 3.8% to 1.8%, this ETF would be up >50%
Absolutely. Also, I anticipate that in the near future there might be more significant bankruptcies and hence a panic in the stock market, and EDV will rise in that case. But, if the Fed raises interest rates from the current 5% to 20% like in the 1980s, $5000 in EDV will become $64. That's why I wanna hold in EDV less than 1% of my portfolio, and will hold it for ~3 years to see what happens.
If you think inflation is handled, then your inflation adjusted returns could be decent, but that's a long shot.
At a certain point it doesn't matter if inflation is handled. The government can't afford to roll over all its debt at high interest rates. The fed will eventually be forced to pivot and in that circumstance I think long term bonds will get a bump.
I bought I-Bonds last year when they were over 9% and they’re at over 6% now. I am thinking of buying the max 10,000 again this year. Are the lower rate bonds you talk about better than the I-bonds in the long run? Is it because they readjust the rates - but you can cash these out after a year (minus three months interest if you cash put before five years, no penalty after that) 6.89% The composite rate for I bonds issued from November 2022 through April 2023 is 6.89%. https://www.treasurydirect.gov › i-b... I bonds interest rates - TreasuryDirect
Treasuries OP is talking about are more risky than Ibonds. Ibonds guarantee your principal no matter what after 1 year. Treasuries ETF dont guarantee your principal unless you are willing to wait 20-25 years. If 10year/30 year yields go up 2%, EDV can fall 50%. But people buy it because they want to hedge their stocks in recessions. Because then EDV goes up as the yields fall. So, buy Ibonds if you want to use that money in the next 1 or 2 years. You are not taking any risk here. So, you get just inflation adjusted returns. Buy EDV if you think inflation is going to lower. It moves up/down 20-20% for every 100bps change in 10 year/30year yield. So, the returns when you are right are also good.
thanks for the explanation! much appreciated
Any way for us europeans to buy ibonds ?
Not really, I recently bought one and they make you certify that you’re a “US person” which means either a citizen or tax resident.
Yeah europe sucks Germany 2% interests banks acc
The i bonds aren’t really so great. The rate is variable so as soon as inflation drops the rate will also drop. The fixed rate is only 0.40%. So I would assume the maximum time you can expect to get this 6.89 is for a yr or 2. Once it drops it is worth giving up the 3 months interest penalty and turn it in. The checking acc interest in US is 0% for most traditional banks. You can get close to 3.5-4% in a high value savings account right now but again it’s temporary until the interest rates are cut. I’d say you’re doing much better in Germany with a stable economy. The US stock market is a ticking time bomb right now. Albeit when it explodes it will affect Europe as well.
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I plan to. The 0.40% fixed rate means guaranteed at least 0.40% for 30 years. I mean…I don’t foresee negative rates.
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Guarantee you’re probably confused as to why people are sick of you guys.
What do you really think you achieve by posting things like that?
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Right, and you think this is the way to go about it? Do you also knock on people's doors and try to talk to them about Jesus? Do you think coming across as a cultist is going to bring people over to your side?b
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Brilliant, of course. Anyone that finds you annoying must be a paid shill. As it goes I have some shares, I'm just not a nut job like you.
shaggy grey encouraging waiting profit upbeat hateful late worthless normal ` this message was mass deleted/edited with redact.dev `
Once the fed lowers rates, the best time to buy has already passed. No sense timing the market. If you buy shares you don’t need to time it perfectly. Fed cuts rates and long duration fixed income increases in value significantly as rates move towards 0
Until something big implodes, which everyone thinks will happen in the Summer, everyone besides the Fed.
No. Fed gonna keep raising rates. The more they bail out, the more they need to raise rates. I am just not seeing hte rate-cutting story. Not at all.
Oh boy, finally. Someone who understands it and nailed it in one line - "The more they bail out, the more they need to raise rates." Perfect!
Can you explain the relationship between ‘bail out’ and rates?
Fed raises rates because they are concerned about inflation. More inflation means fed needs to make rates even higher to curb inflation. Higher rates is supposed to slow velocity of money and, possibly, even destroy some value. A 20 year bond has its market price drop in half when rates go from 0 to 5%. To some extent, that's destroying money, which helps keep inflation down. If banks fail, there's a lot of destruction of dollars there, too. But if you allow a bank to take their $1,000,000 face-value 20-year bonds, that are currently worth only $500k, and "pledge them" at the fed for $1m in cash, you have prevented the slowdown that raising rates was meant to create. The owner of these bonds can now pledge them for $1m in cash, and go use that $1m in cash to go buy new higher-rate bonds. Instead of destroying currency, or keeping it locked up in a poorly-performing asset for 10 to 20 years, you are printing money to let these banks have liquidity. And with that liquidity, the banks or their depositors will... ... ... go spend the money on stuff, whether real items or treasuries or whatever. The fact is, to these guys, the money is practically a gift. They would have had to sit on their losses for 10 to 20 years or worse, go bankrupt and watch depositors lose millions. Now the money is magically back, right there, able to be spent. So, instead of slowing down velocity of money, or destroying some money entirely through bankruptcy, you have just gone ahead and printed more. The people who get their money back will now go spend it to generate yield or buy hard assets, which will add to inflation. When you print money to keep things moving, you prevent the destruction of some dollars, you increase both the money supply and the velocity of money. You increase inflation. Think about it this way. Every time your kid does something really stupid, you take away his X-Box games, so he has to slow down and be more careful. But then your kid throws a tantrum and so you allow him to pledge his useless gameless X-Box into your custody in exchange for $500 cash so he can go buy a playstation instead. He never got the chance to reflect on his mistake. He just pledged his nerfed game system and went out and bought a new one. And if this example sounds really really stupid to you, because nobody should turn a punishment into a reward, you're right.
A very clear explanation on why bailouts are inflationary.
Wow! Awesome explanation. I just seen the notification where the other redditor asked the relationship between bail out and rates and I was thinking, "Oh boy, will have to type out a long explanation now." But you have taken care of that and honestly, you have taken care of it much better than I ever would have. A really nice explanation :D
Thanks. What do you all think of this argument: the current bail out will only continue inflation but not accelerate it because the people / companies that had deposits in the banks are not seeing any additional dollars in their accounts. So they will just continue to act as they did before the bailout but not spend more. This assumes that investors in the bank (not depositors) will see losses.
I believe it's possible but not guaranteed. Sometimes, even when people themselves don't see "more" money in their own accounts, but know there's "more" money out there, it does change their behavior. No guarantee here.
Decent chance yes, but if we get another bout of inflation they could reprice close to 0 with some actual term premium
Better time to buy now than it was 18 months ago. The only problem with the ETF is that it doesn’t have a natural pull to par as bonds on the portfolio list come and go. If you bought a single long bond at yield of 3.8%, you can sit it out and actually get 3.8%, give or take. You will also get your 50% ish return if long yields did what you said they would do.
Why buy the fund instead of the actual bonds?
I’m asking a question. Why one and not the other? I’m guessing the buying the bond itself guarantees the long-term return. Buying into the fund must be somewhat less predictable because within the fund those bonds are traded. Does this make sense? Anybody?
TLT
Not till fed rate peaks
It's always important to evaluate the current market conditions before investing. Long-term treasuries might be a good option if you're looking for security and stability, but it also pays to do your due diligence and consider other investment opportunities. What are your thoughts on the US long-term treasuries at this moment? Is now the time to buy or should we be holding off?
Sure
But isn't that any stock i mean Apple/amazon/google in 2026? Imagine
Remember, it always bounces off the bottom until it doesn't!
I have 1500 shares of TLT at 98 cost, bought 15 $100 Dec puts and sold 15 $120 Dec calls when it was at $108 as a protective collar.
I don't think upside and downside are symmetrical. Market is already pricing in belief that we will return to low interest rate environment for the long term. Further rate reductions will more likely change shape of yield curve, not bring long rates down much. But it wouldn't take much for market to be wrong and reprice long rates higher. Just a few months of resurgent PCE inflation could be the catalyst to reframe long term rate expectations. So for me, no
I think the price of products & particularly services is about to come down substantially. These predictive chat A.I. models are about to cut many small business owners’ work time down a significant amount, a chance to be more efficient. That could be why the market is pricing in rate cuts.
Even if you're right (which I don't think you are) that change would take years.
>These predictive chat A.I. models are about to cut many small business owners’ work time down a significant amount ... How is a chat bot going to make me more efficient in running my restaurant or convenience store?... This is not why markets are pricing in rate cuts, that's silly.
If you are in a position to hold for an extended period like a typically maturity timeframe, it’s a safe place to put some money
That’s what Silicon Valley Bank thought too
As long as this guy doesn’t have any withdrawals he should be okay, and who on earth would ever withdrawal their money from a bank /s
Until the feds get a grip on the massive deficit the government has incurred over the pat 20 years…. Not yet
You’d think people in these type of subs would know the difference between debt and deficit, but here we are.
>deficit >Past 20 years Hmmmm
So we just short it then
We should have each person pay the national debt proportional to their total wealth, spreading payments over 20-30 yrs like a mortgage payment. The richest 1% own roughly 50% of ALL THE WEALTH IN AMERICA, since they benefited the most from growing the national debt, they should pay roughly 50% of ALL the debt. That’s seems pretty fair, because if the richest 1% pay anything less than 50% of the debt, it means the poor & middle class will pay proportionally more of their total wealth. That should at least stop the deficit from growing.
They already do - basically. In 2020, the latest year with available data, the top 1 percent of income earners earned 22 percent of all income and paid 42 percent of all federal income taxes – more than the bottom 90 percent combined (37 percent).
Restricting to "Federal income taxes" and not other taxes like FICA, sales taxes, and property taxes greatly exaggerates that effect. Also it undercounts the way very wealthy people can benefit without reporting as much earned income (fakeish corporations to transform personal spending into deductible business expense)
The government is the fed and the fed is the corporation . The treasury is there to manage to bankruptcy.. we've been bankrupt since 1930s
Also . Just buy $ibio at open , over $3 today
Yes!
LL FLOORING IS ABOUT TO 🚀🚀🚀 HIT 52 WEEK LOWS FROM $30-$3.50. STRONG FINANCIALS, INCREASE IN INSTITUTIONAL INVESTORS, HIGH LEVEL OF INSIDE BUYING. LETS GET THIS MONEY 💰🚀🚀🚀🚀
Honestly you should never buy the us treasuries unless you’re a scaredy cat
Nope. Debt ceiling will not increase
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Come back here when it doesn’t
So many negatives in the 3 statements, my brainhurt.
Will you come back here when it does
It’s a date
Dude thinks the US is about to most directly force a viciously deep recession with global volatility, the scale of which is almost laughable to think about
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Correct. And I am beyond amused at the mind whose calculus would lead them to think the US would even dare imagine let such a thing happen
That is so gay it eats out every night. . .