Bonds Look Good Now

Nov 26, 2022 | Uncategorized

See that?

Now look at this:

What do you see that jumps out at you?  

Well, let me tell ya.  The 10 Year Treasury bond yield has dropped from 4.25 to 3.68 in a month’s time.  That’s a 13.4% DECLINE, again in a month’s time.    

Now notice the Vanguard GNMA fund over this same time is up 28 cents, or 3.11%, NOT INCLUDING interest payments which will be roughly another 2.2 cents per share in interest income over that month’s time.

Below is the Vanguard Total Bond Index. It’s up almost 3.5% for the last month, again without interest income.  3.5% in a MONTHS time for a bond fund, my friends. That doesn’t happen. 

Now, what does this tell you?  Well obviously the markets are not forecasting huge growth and inflation in the near future.   Interestingly, if you look at the two spreadsheet charts at the beginning of this post, you’ll see all yields have dropped over the last month except for…. 

1 year and less.  Why would that be?

Because the Feds control SHORT TERM interest but the market controls LONG TERM interest. The market is telling you what the Fed will be doing soon, lowering interest rates!  You can see this a mile away. When will this happen? Man, I don’t know. But the rate increases are coming to an end. 

And boy howdy, we see mortgage rates declining…not much, mind you. And who knows if this will stick or go down. I don’t. 

I do know the banks have been desperate for higher interest rates on debt as the banks make the most of their profits on Net Interest Income (NII).  High rates = higher NII.  So I would not be shocked if consumer debt interest rates didn’t change much. Hmmm… what does that mean then?

Well in my humble opinion the bond market looks incredibly attractive but the debt market does not, I.E., if you have debt that’s rolling over into higher rates, pay it off!  If retirement is near, look at locking in some 5 year CDs, or annuities.  I doubt very highly the 10 year annuities are going to jump up anytime soon.  But if you can still get a 5 year CD or annuity above 5%, man oh man, that looks very attractive to me. 

Obviously, I don’t know YOUR situation. I’m just giving you ideas. You do what you want with your money. Do not listen to me specifically about your money. This is just my thinking out loud on my keyboard…in my T-shirt on inside out, with my dogs.  Professionalism is NOT me.  Thus, do not listen to me!

Now, mind you, I’ve been an anti-bond guy for years.  My entire channel’s histoire, as we say in the Olde Country, was telling you to avoid bonds.  Now that’s changed. Significantly.  Not to change when you have new information is just dumb.  And I don’t mind ignorance but dumb is something I can do without after two years of Fauci. 

So don’t be dumb and hold dear to information that is no longer relative…(General relativity, anyone? 🙂  See what I did there?)  

BTW if you are not on my Locals channel yet…Well, what’s up? Are you scared or something??? 

Here is a link to an old video I posted on Locals. 

See you there!