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I read what the article said but all I can think of is that everybody is betting on inflation getting worse which means the Federal Reserve will continue r

by pooper 3y ago

I read what the article said but all I can think of is that everybody is betting on inflation getting worse which means the Federal Reserve will continue raising rates which means if you buy a long term bond now you are worse off than holding literal cash and buying bonds in n months. I hope I am wrong. I hope we won't see more interest rate hikes but wishes are not fishes.

dragontamer 3y ago
TIPS and I-bonds are still Treasury Bonds. So... on the contrary. People have been selling TIPS and I-Bonds because inflation has come down from 9% to only 3%ish these days, so if you're buying inflation-based bonds, you're losing out significantly.
WheatMillington 3y ago
I'm sorry, what? Do you have any idea whatsoever you're talking about? Why would cash, with a nominal value of x, be worth more in in a year than cash with a nominal value of x plus some interest? Inflation aside, as this affects the value of your holdings in any case, in what universe are you better off doing nothing than earning a return?
- dragontamer 3y ago
  On this point, the other guy was correct. Cash today is worth 5.25% from a money market fund (aka: the overnight lending rate). 10Y Bonds are only 4.5% or something. So "cash" (where "cash" means a money market fund, which is a generally accepted definition of "cash") is beating the 10Y and 30Y at the moment.
- Rury 3y ago
  It can, it just depends. Take these hypothetical scenarios for example: Scenario 1: Buy 10Y today, @4.5% interest. Scenario 2: Hold that money as cash for 5 years, and then use it to buy 5Y when it's yielding 17% interest. Scenario 2 will yield a greater ROI after the 10 years. Obviously, there's no way of knowing exactly what the future will hold (many other scenarios are also possible). It just all depends.
  - xyzzy123 3y ago
    Perhaps the misconception is the idea that you could buy 10Y now and then sell them later for the same value if a better rate comes along, i.e, mistaking 10Y bonds for "cash" and not realising they can drop in value.
beezle 3y ago
Well most in the market are now on the other side of that bet but even argument's sake and say it is true, there is a fairly good chance that the bond you buy today will be better than the one n months from now because the consensus was wrong (ie, economy slowed, fed cut, some unexpected headwinds, etc). This is no different than sitting on the sidelines trying to get into a stock at the perfect point or waiting on 'the inevitable sell off'. Maybe it happens, happy days. Maybe it doesn't, very sad days.

by pooper 3y ago

dragontamer 3y ago

TIPS and I-bonds are still Treasury Bonds. So... on the contrary. People have been selling TIPS and I-Bonds because inflation has come down from 9% to only 3%ish these days, so if you're buying inflation-based bonds, you're losing out significantly.

WheatMillington 3y ago

I'm sorry, what? Do you have any idea whatsoever you're talking about? Why would cash, with a nominal value of x, be worth more in in a year than cash with a nominal value of x plus some interest? Inflation aside, as this affects the value of your holdings in any case, in what universe are you better off doing nothing than earning a return?

dragontamer 3y ago
On this point, the other guy was correct. Cash today is worth 5.25% from a money market fund (aka: the overnight lending rate). 10Y Bonds are only 4.5% or something. So "cash" (where "cash" means a money market fund, which is a generally accepted definition of "cash") is beating the 10Y and 30Y at the moment.
Rury 3y ago
It can, it just depends. Take these hypothetical scenarios for example: Scenario 1: Buy 10Y today, @4.5% interest. Scenario 2: Hold that money as cash for 5 years, and then use it to buy 5Y when it's yielding 17% interest. Scenario 2 will yield a greater ROI after the 10 years. Obviously, there's no way of knowing exactly what the future will hold (many other scenarios are also possible). It just all depends.
- xyzzy123 3y ago
  Perhaps the misconception is the idea that you could buy 10Y now and then sell them later for the same value if a better rate comes along, i.e, mistaking 10Y bonds for "cash" and not realising they can drop in value.

beezle 3y ago

Well most in the market are now on the other side of that bet but even argument's sake and say it is true, there is a fairly good chance that the bond you buy today will be better than the one n months from now because the consensus was wrong (ie, economy slowed, fed cut, some unexpected headwinds, etc). This is no different than sitting on the sidelines trying to get into a stock at the perfect point or waiting on 'the inevitable sell off'. Maybe it happens, happy days. Maybe it doesn't, very sad days.