When is the best time to buy bonds? The common sense rule of thumb answer for long term bonds, is when the yield curve becomes inverted. An inverted yield curve is when short term bonds yield more than the long term bonds. This doesn't occur all that often. The last time was early in 2006. This Treasury dept link has data in text format for those that want to chew on some numbers.
Right now the yield curve has gotten quite a bit steeper, at least for treasury bonds. This means that despite the low yields for short term paper, it is a good time to stay with shorter maturities.
What is interesting is to compare and contrast the recent action of three bond ETFs:
TLT long term treasuries
BND corporate bond index
HYG high yield bond fund ("junk bonds")
TLT has been more volatile than BND. HYG and BND have been not gone down with TLT during the recent slide in Treasuries.
Positions: long SPY
No comments:
Post a Comment