Long Treasurys

[foglifter]

I’ve been revisiting the role of LTTs in my Golden Butterfly-ish portfolio and have really appreciated the depth of discussion here. Reading the recent “Safe Haven Status” thread prompted me to take another look at how I’m thinking about LTTs within this framework.

I understand the classic PP rationale: LTTs are held primarily as a deflation and recession hedge, not as a return engine. From that lens, 2022 looks less like a failure and more like an inflation/rate-shock regime where LTTs aren’t expected to shine. Still, it’s hard not to reflect on how that episode felt in practice and what it implies for correlations and drawdowns during inflationary periods.

My bond allocation is currently a STT/LTT barbell, consistent with PP/GB design. I’m thinking through whether, in real-world use, it still makes sense to:
a) keep the barbell as designed
b) substitute ITTs for LTTs
c) tilt more toward STTs and accept less convexity

For context, I hold some ~3%-yielding long-term Treasuries purchased in 2019 that are currently down -27%. I’m comfortable with duration risk conceptually, but I’m more interested in how LTTs actually function over long holding periods — particularly through full cycles of inflation, disinflation, and recession.

I’m not trying to forecast rates or inflation. I’m really just hoping to learn from folks who’ve actually lived with PP/GB allocations through multiple market cycles. How do you think about the role of LTTs today — in terms of diversification, rebalancing, and overall portfolio resilience over the long run?

[Smith1776]

My concern with long-term treasury bonds in the PP has always been that their volatility and risk profile are not constant. They're both higher when rates are lower, and lower when rates are higher.

Fortunately, I found a solution here in Canada. I'm sure similar solutions exist in the U.S.

I found a long-term treasury bond fund that targets a specific duration rather than a specific maturity.

https://www.td.com/ca/en/asset-manageme ... l-Bond-ETF

The ETF is TCLB, and it targets a 15-year duration regardless of the prevailing interest rate. When rates are low, it buys bonds on the shorter side. When rates are high, it buys bonds on the longer side.

This helps to ameliorate concerns about the asymmetric risk-reward trade-offs of long bonds when rates are low.

[boglerdude]

Most bond funds keep consistent duration, maybe there's another way to explain that fund

If you got burned holding LTTs at 2%, like I did, it's on you. Zero lower bound + shrinking population(and inflation to keep the lines going up), which Browne may not have considered.

[flyingpylon]

I've been thinking about long-term bonds too, and the only things I know for sure are that I don't know very much and that I can't predict the future. So I don't claim to have any answers.

I think it depends on your time frame. I've never owned bonds (or even paid attention to them) during an extended down period so this is new to me. However, I questioned stocks (in retrospect) between 2000-2011, questioned gold from 2012-2020, and of course cash was "trash" for a long time too. I bought and held them all as part of the PP and then GB, and things have worked out pretty well overall, by design. I made some money by rebalancing out of bonds when they popped in 2020 but of course it's pretty much been downhill from there. Heck, I still have a small batch of 1.875% bonds that are down 45%! Part of me wants to get rid of them just so I don't have to look at them anymore, but another part of me wants to see if convexity is really a thing.

Sometimes when I question a particular asset I read this blog post from Tyler at Portfolio Charts: How to Survive and Make Money in the Matrix

Also, "The Algorithm" sends things my way about potential disinflation/deflation that make me wonder where we're headed. Some people say that tariffs provide some protection against global deflation so perhaps the effects would be muted in the US. I don't claim to know either way.

Here's a post I saw recently from someone that calls himself "Common Sense Investor" titled The Biggest Trade of 2026 Isn't Stocks - It's Bonds!

Maybe he's right, or maybe not. ¯\_(ツ)_/¯

[mathjak107]

his points are very strong

[I Shrugged]

Yes, the kicker is that we could experience short or longer term deflation, which would shake the world. Although, we (including me) all assume that they will create money to prevent that. Ultimately leading to persistent double digit inflation. Honestly I have found it more productive to not try to guess these things. I don't love treasuries but in the context of the portfolio they haven't killed me. In 2009 I switched a tax deferred account of ~$67 (leaving zeroes to the imagination) to VG Long Term Treasury Admiral Fund, and haven't touched it since. It's now at $104. I'm too lazy to figure out the IRR. It's not great but as I say, it didn't kill me. And that's with the rates we've seen.

Although I think it was up to 150 ish at one time. :/

Maybe rebalancing would have helped but that's not the point here. It's been a slog, but it was there to be called upon.

[foglifter]

flyingpylon, thanks for posting the links! The CSI's points seem reasonable.