Author Topic: Opinions from Bond Experts Please  (Read 374 times)

blue_green_sparks

  • Stubble
  • **
  • Posts: 136
Opinions from Bond Experts Please
« on: April 19, 2020, 08:51:44 AM »
Before all the recent volatility I was looking at buying a 7 to 10 year ladder of Treasury Bonds and Agency/Government-Sponsored Enterprise Bonds to maintain our fixed passive income level as some of our CDs will be maturing. Normally I would have little concern about these instruments but with rates so low are these AA1/AA+ bonds a particularly poor choice right now?

ChpBstrd

  • Handlebar Stache
  • *****
  • Posts: 2332
Re: Opinions from Bond Experts Please
« Reply #1 on: April 19, 2020, 09:18:16 PM »
With 7-10 year treasuries, you're looking at interest rates of 0.53 - 0.65% in exchange for massive interest rate risk and not much interest rate upside.

https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield

So unless you retired on a <1% WR, this passive income isn't going to do much for you. I'd consider writing cash-secured puts on TLT, way out of the money. You'll earn about 4-5X what 7-10 year bonds currently pay until you eventually get assigned at a price where you'll earn 4-5X the yield 7-10 year bonds currently pay.

Unless you're managing millions in your government bond allocation, you could beat current interest rates with the new account signup bonuses offered for savings accounts.

Wintergreen78

  • Bristles
  • ***
  • Posts: 312
Re: Opinions from Bond Experts Please
« Reply #2 on: April 20, 2020, 09:17:38 AM »
Jim Collins wrote up his thoughts on bonds here: https://jlcollinsnh.com/2012/10/01/stocks-part-xii-bonds-and-a-bit-on-reits/

Might be worth looking at even if you donít end up going the exact same route as him.