bond market

telly_lover

im thinking of taking some money out of stocks and buying a vanguard short term bond etf , most of the fund has a tripple A rating according to yahoo finance

my question is this , in the event of a major market crash , are bonds like u.s treasurys 100% safe , obvioulsy the greek or spanish kind are not but would you have capital guarentee like you do with a bank , assuming the usa itself does not default , do downgrades effect bond values

Roonbox

telly_lover wrote: »

im thinking of taking some money out of stocks and buying a vanguard short term bond etf , most of the fund has a tripple A rating according to yahoo finance

my question is this , in the event of a major market crash , are bonds like u.s treasurys 100% safe , obvioulsy the greek or spanish kind are not but would you have capital guarentee like you do with a bank , assuming the usa itself does not default , do downgrades effect bond values

The bond market is coming to the end of a 30 year cycle and it essentially a huge bubble... It is by no means a safe haven, although in the short term people will probably flee to the bond market if something suddenly happened this year..

euroboom13

Roonbox wrote: »

The bond market is coming to the end of a 30 year cycle and it essentially a huge bubble... It is by no means a safe haven, although in the short term people will probably flee to the bond market if something suddenly happened this year..

well said.

euroboom13

shocks this year could send people out of bonds too,just as easily

telly_lover

Roonbox wrote: »

The bond market is coming to the end of a 30 year cycle and it essentially a huge bubble... It is by no means a safe haven, although in the short term people will probably flee to the bond market if something suddenly happened this year..

I'm aware of the fact that bonds are in a 30 year bull run , sentiment is much more important than historical analysis and statistics however , bonds have been the place of refuge along with the dollar this year and that is likely to continue , I only want a safe place for a year until I'm ready to buy property

HowFinancial

100% safety is a Fairytale!

However, AAA rated bonds, be they corporate or sovereign bonds are relatively secure. PIMCO or Vanguard are big enough names with a variety of bond offerings.

In terms of bank deposits KBC have a good rate for a 14 month fixed term contract.

Roonbox

telly_lover wrote: »

I'm aware of the fact that bonds are in a 30 year bull run , sentiment is much more important than historical analysis and statistics however , bonds have been the place of refuge along with the dollar this year and that is likely to continue , I only want a safe place for a year until I'm ready to buy property

Hard to say for just one year, I'd prob put it in the bank to be honest

telly_lover

HowFinancial wrote: »

100% safety is a Fairytale!

However, AAA rated bonds, be they corporate or sovereign bonds are relatively secure. PIMCO or Vanguard are big enough names with a variety of bond offerings.

In terms of bank deposits KBC have a good rate for a 14 month fixed term contract.

KBC offer a very tempting 4% rate over twelve months , unfortunatley that doesnt cover you against a revert to the punt , im currently with rabbo direct who are also quite safe if what i read is correct

vanguard dont seem to offer microsoft bonds , microsoft have a higher rating than the u.s goverment

roro2

would you have capital guarentee like you do with a bank , assuming the usa itself does not default , do downgrades effect bond values

No, your capital is not guaranteed. Bond prices change on a daily basis, as is the case with equities for example, and factors like downgrades do affect values, often in unpredictable ways.

telly_lover

roro2 wrote: »

No, your capital is not guaranteed. Bond prices change on a daily basis, as is the case with equities for example, and factors like downgrades do affect values, often in unpredictable ways.

the vanguard etf bond i refer to has budged less than 8% ( up ) in the past five years

id be of the opinion that while bonds should be due a serious pullback , all indications are for further increase , gold has not gone up on months which suggests its not the doomsday trade many make it out to be

EMPM

roro2 wrote: »

No, your capital is not guaranteed. Bond prices change on a daily basis, as is the case with equities for example, and factors like downgrades do affect values, often in unpredictable ways.

That is only if you are a forced seller at a time when the price is deflated. If you hold the bond to maturity the bond will pay you back 'Par' (100).

You could buy short dated (less than one year) US T bills, currently trading slightly below par or German Bubills trading slightly above par. On maturity you get back $100 or €100 (assuming we are still using the €). I cant see the US government defaulting.

turbobaby

USA Today wrote:

Last month, the government put $25.5 billion of 10-year Treasury notes up for sale. The notes carried a 1.75% interest rate, well below the inflation rate. Anyone who bought a note would lose money to inflation for a decade.

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