3 ms·

I started investing in '08. I've always been a pretty staunch boglehead, and I've always held 'age in bonds' which is pretty conservative. Most of my bonds we

I started investing in '08. I've always been a pretty staunch boglehead, and I've always held 'age in bonds' which is pretty conservative. Most of my bonds were in the TSP G fund (zero risk, 10y treasury yields) with a little in short term bonds. Seeing how badly even short term bonds have gotten slaughtered in this downturn has made me pretty jaded. They'll have a much smaller role in my asset allocation going forward. Probably no more than 30% of my portfolio even in retirement.

metaphor 3y ago
> Most of my bonds were in the TSP G fund (zero risk, 10y treasury yields) with a little in short term bonds. You're clearly confused. The TSP G Fund[1] is comprised of 100% nonmarketable short-term Treasuries specially issued to the TSP; 10-year T-notes don't exist in its composition whatsoever. and its nominal return over any arbitrary period has never been negative...in other words, bond duration risk simply isn't applicable to the fund. Furthermore: >> The G Fund rate is calculated by the U.S. Treasury as the weighted average yield of approximately 183 U.S. Treasury securities on the last day of the previous month. [1] https://www.tsp.gov/funds-individual/g-fund/ https://www.tsp.gov/funds-individual/g-fund/
- wing-_-nuts 3y ago
  >In practice, monthly returns have closely matched the percentage rate for the 10-year U.S. Treasury Note almost perfectly. The G Fund and 10-year are 98.4% correlated since 1988 https://www.govexec.com/pay-benefits/2023/05/tsp-g-fund-debt-ceiling-market-turmoil/385889/ https://www.govexec.com/pay-benefits/2023/05/tsp-g-fund-debt...
  - metaphor 3y ago
    That's nice but entirely irrelevant. If you were 100% allocated in TSP G Fund and Treasury yields spiked across the curve, your account balance never goes down and you could withdrawal the entire amount at any time without losing a single penny. If you were 100% allocated in 10-yr T-notes and Treasury yields spiked across the curve, well...you'd be swallowing a substantial loss proportional to your unhedged duration exposure if you were either to liquidate your position before maturity or before yields normalize. This[1] is what you don't understand. [1] https://www.investopedia.com/terms/b/bond-yield.asp https://www.investopedia.com/terms/b/bond-yield.asp
    - wing-_-nuts 3y ago
      Yeah, I do in fact understand the inverse relationship between yield and price. What I'm saying is that in practice it doesn't really matter with respect to the G fund. I don't know anywhere else one can get a risk free return equivalent to a 10y bond. This whole thing is a very odd, pedantic thing to argue. There's a reason why they make up most of the bond portion of my portfolio.
      - metaphor 3y ago
        > I don't know anywhere else one can get a risk free return equivalent to a 10y bond. How about equivalent risk-free return, even better yield, upside potential, optionality...and you don't need to be a federal employee to play? It's been hiding in plain sight[1][2] for over a year now, but I'm not a financial advisor and certainly not your financial advisor...just an interwebs rando with a hobby positing food for critical thought. [1] https://fred.stlouisfed.org/graph/?g=17THg https://fred.stlouisfed.org/graph/?g=17THg [2] https://fred.stlouisfed.org/graph/?g=17THh https://fred.stlouisfed.org/graph/?g=17THh
ffhhttt 3y ago
> They'll have a much smaller role in my asset allocation going forward. If you would ever consider bonds wouldn’t now be one of the best time ever to buy them? (unless you believe interest rates could sill go up significantly)
- wing-_-nuts 3y ago
  I might consider barbelling my gfund with some 30y treasuries, but I now think ageInBonds is bunk. I don't think they provide nearly the diversification benefit they used to. If a friend asked me for asset allocation advice, I would not recommend they have more than 20-30% in bonds.

metaphor 3y ago

> Most of my bonds were in the TSP G fund (zero risk, 10y treasury yields) with a little in short term bonds. You're clearly confused. The TSP G Fund[1] is comprised of 100% nonmarketable short-term Treasuries specially issued to the TSP; 10-year T-notes don't exist in its composition whatsoever. and its nominal return over any arbitrary period has never been negative...in other words, bond duration risk simply isn't applicable to the fund. Furthermore: >> The G Fund rate is calculated by the U.S. Treasury as the weighted average yield of approximately 183 U.S. Treasury securities on the last day of the previous month. [1] https://www.tsp.gov/funds-individual/g-fund/ https://www.tsp.gov/funds-individual/g-fund/

wing-_-nuts 3y ago
>In practice, monthly returns have closely matched the percentage rate for the 10-year U.S. Treasury Note almost perfectly. The G Fund and 10-year are 98.4% correlated since 1988 https://www.govexec.com/pay-benefits/2023/05/tsp-g-fund-debt-ceiling-market-turmoil/385889/ https://www.govexec.com/pay-benefits/2023/05/tsp-g-fund-debt...
- metaphor 3y ago
  That's nice but entirely irrelevant. If you were 100% allocated in TSP G Fund and Treasury yields spiked across the curve, your account balance never goes down and you could withdrawal the entire amount at any time without losing a single penny. If you were 100% allocated in 10-yr T-notes and Treasury yields spiked across the curve, well...you'd be swallowing a substantial loss proportional to your unhedged duration exposure if you were either to liquidate your position before maturity or before yields normalize. This[1] is what you don't understand. [1] https://www.investopedia.com/terms/b/bond-yield.asp https://www.investopedia.com/terms/b/bond-yield.asp
  - wing-_-nuts 3y ago
    Yeah, I do in fact understand the inverse relationship between yield and price. What I'm saying is that in practice it doesn't really matter with respect to the G fund. I don't know anywhere else one can get a risk free return equivalent to a 10y bond. This whole thing is a very odd, pedantic thing to argue. There's a reason why they make up most of the bond portion of my portfolio.
    - metaphor 3y ago
      > I don't know anywhere else one can get a risk free return equivalent to a 10y bond. How about equivalent risk-free return, even better yield, upside potential, optionality...and you don't need to be a federal employee to play? It's been hiding in plain sight[1][2] for over a year now, but I'm not a financial advisor and certainly not your financial advisor...just an interwebs rando with a hobby positing food for critical thought. [1] https://fred.stlouisfed.org/graph/?g=17THg https://fred.stlouisfed.org/graph/?g=17THg [2] https://fred.stlouisfed.org/graph/?g=17THh https://fred.stlouisfed.org/graph/?g=17THh

ffhhttt 3y ago

> They'll have a much smaller role in my asset allocation going forward. If you would ever consider bonds wouldn’t now be one of the best time ever to buy them? (unless you believe interest rates could sill go up significantly)

wing-_-nuts 3y ago
I might consider barbelling my gfund with some 30y treasuries, but I now think ageInBonds is bunk. I don't think they provide nearly the diversification benefit they used to. If a friend asked me for asset allocation advice, I would not recommend they have more than 20-30% in bonds.