Flat yield curve and switching to intermediate Treasuries

Discussion of the Bond portion of the Permanent Portfolio

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InsuranceGuy
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Re: Flat yield curve and switching to intermediate Treasuries

Post by InsuranceGuy » Wed Jan 24, 2018 12:48 am

ochotona wrote:FWIW, there is no long Treasury sell signal coming from 1-year lookback time series momentum. And momentum has been an awful strategy for long bonds, because they've been in a 35 year bull market. If the tide turns, I'm sure I'll be commenting on it. But for now, I would not sell any.
Momentum has been notoriously awful for bonds. I seem to recall I did some HBPP stress testing and when 10 year yields are <2% it was better to switch to ITT and then switch back to TLT when >2%. I'd need to try and find what I did but might be worth a shot.
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ochotona
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Re: Flat yield curve and switching to intermediate Treasuries

Post by ochotona » Mon Jan 29, 2018 9:17 am

I see tax loss harvesting in my future...
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jhogue
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Re: Flat yield curve and switching to intermediate Treasuries

Post by jhogue » Mon Jan 29, 2018 10:09 am

ochotona wrote:I see tax loss harvesting in my future...
Are you saying you look forward to tax loss harvesting LTTs in a taxable account?

All my LTTs are in tax deferred (76%) or Roth accounts (24%). I have no LTTs in taxable and have been wondering if I should re-think that asset location strategy.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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ochotona
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Re: Flat yield curve and switching to intermediate Treasuries

Post by ochotona » Mon Jan 29, 2018 7:02 pm

jhogue wrote:
ochotona wrote:I see tax loss harvesting in my future...
Are you saying you look forward to tax loss harvesting LTTs in a taxable account?

All my LTTs are in tax deferred (76%) or Roth accounts (24%). I have no LTTs in taxable and have been wondering if I should re-think that asset location strategy.
Looking forward to it is not quite right... I see it in my future. It's like getting a boil lanced.
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jhogue
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Re: Flat yield curve and switching to intermediate Treasuries

Post by jhogue » Tue Jan 30, 2018 8:16 am

When you put it like that, I guess I am not missing anything!
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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jhogue
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Re: Flat yield curve and switching to intermediate Treasuries

Post by jhogue » Wed Jan 31, 2018 8:56 am

This just in. The bond market really is crazy.

See the article in today's Wall Street Journal, "Easy-Money Decade Upends Bond Market."
The accompanying graph shows that the yield on 10 year Portuguese government bonds is now higher than 10 year U.S. Treasurys.

Think about it: Which would you rather own?
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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buddtholomew
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Re: Flat yield curve and switching to intermediate Treasuries

Post by buddtholomew » Wed Jan 31, 2018 9:43 am

That makes sense to me.
More risk, higher yield.
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ochotona
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Re: Flat yield curve and switching to intermediate Treasuries

Post by ochotona » Wed Jan 31, 2018 11:43 am

So if I tax-loss harvest my Treasuries, do I just buy a different CUSIP, even if the maturity date is only different by 1 month? Is that "different enough" for the IRS? I don't want to be disallowed due to wash sale rules.
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Re: Flat yield curve and switching to intermediate Treasuries

Post by Mr Vacuum » Wed Jan 31, 2018 12:05 pm

ochotona wrote:So if I tax-loss harvest my Treasuries, do I just buy a different CUSIP, even if the maturity date is only different by 1 month? Is that "different enough" for the IRS? I don't want to be disallowed due to wash sale rules.
I was wondering the same thing and looked around the other day. The question is not settled in great detail, but 1 month is probably not enough, especially at 20 years out.

http://www.aaii.com/journal/article/kee ... sale-rules
The law has clarified which bonds are considered substantially identical. Revenue Ruling 58-211 summarizes these findings. The Treasury Department determined that to be considered substantially identical the bonds must not be substantially different in any material feature. The material features include the issuer, maturity, interest rate and yield, and any early redemption restrictions provisions. Thus, selling a bond from an issuer and buying a new bond from the same issuer is not a wash sale as long as the maturity date on the new bond is significantly different, or the new bond has a significantly different coupon interest rate or early redemption rights.

Determining what magnitude of change is significant is the challenge here. When considering whether bond maturity dates were significantly different, a court ruled that a six-month difference on a maturity of one year is significant, but a six-month difference on a maturity of 20 years is not. In another case, the court ignored the maturity date difference of 2½ years when both bonds were callable beginning on the same date. If concerned about whether the bonds’ material features are significantly different, investors might be wise to replace the bond with a bond from a different issuer. This will keep the transaction from violating the wash-sale rules.
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ochotona
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Re: Flat yield curve and switching to intermediate Treasuries

Post by ochotona » Wed Jan 31, 2018 12:21 pm

Play the hippity hop game, or wait in cash. Not very clear
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jhogue
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Re: Flat yield curve and switching to intermediate Treasuries

Post by jhogue » Wed Jan 31, 2018 1:27 pm

jhogue wrote:This just in. The bond market really is crazy.

See the article in today's Wall Street Journal, "Easy-Money Decade Upends Bond Market."
The accompanying graph shows that the yield on 10 year Portuguese government bonds is now higher than 10 year U.S. Treasurys.

Think about it: Which would you rather own?

Oops!

A definite Freudian slip. I meant to write that 10 year Portuguese bonds now have a LOWER yield than 10 year U.S. Treasurys.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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buddtholomew
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Re: Flat yield curve and switching to intermediate Treasuries

Post by buddtholomew » Wed Jan 31, 2018 4:26 pm

jhogue wrote:
jhogue wrote:This just in. The bond market really is crazy.

See the article in today's Wall Street Journal, "Easy-Money Decade Upends Bond Market."
The accompanying graph shows that the yield on 10 year Portuguese government bonds is now higher than 10 year U.S. Treasurys.

Think about it: Which would you rather own?

Oops!

A definite Freudian slip. I meant to write that 10 year Portuguese bonds now have a LOWER yield than 10 year U.S. Treasurys.
Way to flip my mind upside down.
Agree, that seems ludicrous that US 10 year treasuries are more risky than their Portuguese counterparts.
We do have 20 trillion in debt, but who cares since we can print even more.
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