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What do you make of the bond market right now?

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What do you make of the bond market right now?
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Hard to tell.

On one hand, the Fed says we're going to have 4 rate hikes over the course of next year. Likely small increments like the last two (~0.25% each). But that will be enough to keep prices dropping the entire time. So it's not really that great of a place to stow value since it will slide.

On the other hand, if we do get a stock market meltdown bonds will be one of the safe places to take shelter provided you were there before the crash happened. If it does happen I'm not sure what the likelihood would be for the Fed to stay with its rate-raising plans. I'd guess they'd announce that the rest of the rate hikes would be cancelled, so existing bonds would immediately snap upward in value.

Let's use BND as a model. During 2008 it was at its lowest at ~69.96, down from 76.86 the month before and 78.53 early that year. Three months after the worst of the crash it was back up to 78.52.

I guess it also depends what would cause the next market meltdown. 2008 was mortgage backed securites. It looks like the next one might be consumer and/or education debt. In that case, both govt and corporate debt might be risky plays.

I'm long VCLT in my HSA so I'm pretty sensitive to rate hikes. It's got good distributions but I'm considering getting out since I expect a long slow slide that will cancel out what it is paying. On the other hand it looks like its top holding is AB Inbev, and beer is a vice good that flows more readily during recessions.
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>>1740753
im in blackrock's junk bond fund. I'm thinking a lot of the debt could be upgraded as there are many mom and pop oil drilling firms that are shuttered right now basically just waiting for oil to rise and the new administration will make domestic drilling a priority for sure anyways. I'm not touching stock indexes until the market cools off as as I'm making excellent returns on my money anyways
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>>1740782
There is no money in oil in the long-term. Not even Trump can stop progress.
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>>1740827
Flipping debt on an upgrade is a very different strategy than holding through maturity. He said he was doing the former and the case makes sense
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>>1740701
Unless boomers start dying off en mass and all the 50% unemployed millennials suddenly get jobs to go out and actually buy shit instead of taking part in """le gig / sharing economy""", bond yields will remain at all time lows for now.
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>>1740753
>the Fed says we're going to have 4 rate hikes over the course of next year. Likely small increments like the last two (~0.25% each).

Yellen today said they'll push the Fed's benchmark rate close to 3% by the end of 2019. We're at 0.75% now. 3 years to gain 2.25% is a pretty easy pace if they continue quarter-percentage bumps. 2017: 4 hikes, 2018: 3 hikes, 2019: 2 hikes.

Of course, 3% is still a babby-tier rate compared to the past. 5.25% in 2007, 6% in 2000. 3% was considered a low in the 90s.
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>>1741963
You kids must not have been alive to see the fed funds rate hit 19% back in the 1980s. What a time.
Thread posts: 8
Thread images: 1


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