Do 30-Year Bonds Still Belong in a Permanent Portfolio? 🙀

[Xan]

I'm not sure it's terribly helpful to paste the output of an LLM here.

[mathjak107]

except for long bonds to do their thing when everything else is falling apart depends very heavily on why things are falling apart .

we saw devastation in every asset clsss in 2022 and long bonds had tlt falling minus 32%.

so they are kind of a fair weather friend

[dualstow]

Now that is a chatGPT reply if I ever saw one.

[whatchamacallit]

I think Larry Swedroe's oft-cited rule of thumb - 20 basis points in additional interest for each year of additional bond duration - is still a great place to start in terms of looking at duration and interest rate risk. By that metric you'd want to stick with 0-5 year durations right now. Of course there's also bond convexity to take into account, and there, too, Tyler @ Portfolio Charts is super-helpful:

I am also following Swedroe's rule for fixed income but decided to do a 3 asset portfolio. 1/3 each in stocks, gold and treasuries with maturity based on Swedroe's rule.

I dislike that I will have to monitor interest rates to determine what maturity treasuries to be in but it seems like it will be easy so far. I don't plan on relying on precise duration calculations. I expect to be able to just eyeball interest rates and see that a higher rate feels worth the longer duration.

Right now with my understanding of Swedroe's rule, I don't see a reason to be out longer than 1 or 2 months. So I am just holding treasury money market funds to make it easy.

[Grinch]

My choice for long-term bonds is an ETF on the EUROGOV® Germany 10+.
The average remaining term is currently 18.9 years.
The ISIN is DE000ETFL219.

This year, too, despite all the uncertainty caused by politics and the decline of the US dollar for European investors in the eurozone, the portfolio is yielding a return of 4.83%. This is exclusively from gold and account balances. Stocks and bonds are underwater this year.

None of the four components have hit the 35/15 range since its launch in January 2023.

[frugal]

My choice for long-term bonds is an ETF on the EUROGOV® Germany 10+.
The average remaining term is currently 18.9 years.
The ISIN is DE000ETFL219.

This year, too, despite all the uncertainty caused by politics and the decline of the US dollar for European investors in the eurozone, the portfolio is yielding a return of 4.83%. This is exclusively from gold and account balances. Stocks and bonds are underwater this year.

None of the four components have hit the 35/15 range since its launch in January 2023.

Hello

So you use the tradicional PP

Ticker EL4V

People is decreasing the LTB duration to around 10 instead of 20-30 years

I don’t know

[Smith1776]

We are using LLMs for everything at work lately, and it's being encouraged more and more.

A lot of my job is just acting as a proofreader for LLM output for errors now.

Sorry, but to the point about 30 year bonds in the PP... I've long said that they do belong in the PP, but only if the interest rate as compensation for the risk is appropriate. They shouldn't be bought at any price.

[frugal]

We are using LLMs for everything at work lately, and it's being encouraged more and more.

A lot of my job is just acting as a proofreader for LLM output for errors now.

Sorry, but to the point about 30 year bonds in the PP... I've long said that they do belong in the PP, but only if the interest rate as compensation for the risk is appropriate. They shouldn't be bought at any price.

Hi!

it is difficult to preview the market ...

How do you know?

[Smith1776]

We are using LLMs for everything at work lately, and it's being encouraged more and more.

A lot of my job is just acting as a proofreader for LLM output for errors now.

Sorry, but to the point about 30 year bonds in the PP... I've long said that they do belong in the PP, but only if the interest rate as compensation for the risk is appropriate. They shouldn't be bought at any price.

Hi!

it is difficult to preview the market ...

How do you know?

Yeah, I don't have particular good system in place for that. If I recall correctly, Larry Swedroe has a rule of thumb regarding sufficient compensation for duration risk. Something like 30 basis points for each additional year?

In the end my solution was to simply reduce the total size of my bond holdings so that I would be comfortable holding them at any price.

As of now my fixed income weighting is 30% in global bonds. That roughly equates to 15% cash and 15% long-term bonds. So I guess that's my current allocation to the long end of the curve. I am comfortable at holding this weighting for the long-term regardless of interest rates... but Browne's 25% in LTTs? Not quite so much.

There was nothing scientific in my approach. Although I will note that 15% was the lower bond of Browne's rebalancing bands, to be fair.