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Old 13-03-2020, 10:56 AM   #1921
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My monthly investments are never going stop, but that is into equities.

The idea behind the bond fund holdings was safety and yield. I’ve dumped a substantial amount into bond funds earlier this year, thinking they would not drop if equities did. They have now lost 12% of their value. The high yield portion lost 24%, pretty much in-line with the stock market. At least with the stock market, I can accept the risk because companies will emerge and earnings will grow... but with these bond funds? It seems like the loss due more to mechanics than fundamentals, with unknown recoverability.

Lower prices should mean you find them more attractive.

I think if we’re honest with ourselves we knew there was a decent or better chance Herbert Hoover the Sequel would “nuke Denmark” metaphorically. (OK, so he nuked the U.S. Oooops.) Except for The Godfather and maybe The Terminator, the sequel is always worse. So we’ve just got to muddle through it until President Biden and Vice President (fairly soon to be President) Harris hire lots of competent public servants, with the help of Majority Leader Schumer and (please!) a no filibuster Senate. I think you just keep plugging away with monthly buys per normal, and we’ll emerge in 2021, most of us anyway. The first half of 2020 at least is just a write-off, really.
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Old 13-03-2020, 12:06 PM   #1922
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The idea behind the bond fund holdings was safety and yield. I’ve dumped a substantial amount into bond funds earlier this year, thinking they would not drop if equities did. They have now lost 12% of their value. The high yield portion lost 24%, pretty much in-line with the stock market. At least with the stock market, I can accept the risk because companies will emerge and earnings will grow... but with these bond funds? It seems like the loss due more to mechanics than fundamentals, with unknown recoverability.
The high yield (a.k.a. junk) segment of the bond market was/is never about safety. That part is definitely not surprising. The highest quality sovereign bonds have done quite well, such as U.S. Treasuries.

I don't think any of this is particularly strange. We have a sudden shock (COVID-19), a longer running shock (Trump), and both the stock and bond markets are reacting to these intersecting events as you'd expect, really. Markets are functioning and orderly. Investment grade corporate bond performance is going to be muted -- but you don't see them down 27%, do you? -- and high quality sovereign bonds are doing well. It all makes sense, in line with how you'd expect all these markets to react in these circumstances.

So if the high yield portion is down 24% from wherever you're measuring it, and overall is down 12%, then your investment grade corporates and sovereigns are holding up pretty well, right? "Working as designed," I'd say.
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Old 13-03-2020, 04:54 PM   #1923
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The high yield (a.k.a. junk) segment of the bond market was/is never about safety. That part is definitely not surprising. The highest quality sovereign bonds have done quite well, such as U.S. Treasuries.
What's your view of A35? I really don't understand why it dropped 5% today...
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Old 13-03-2020, 05:10 PM   #1924
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thanks BBC. I will wait and see over the next few days.

On a side note, approval to purchase stocks and index CFDs sure take quite awhile
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Old 13-03-2020, 05:17 PM   #1925
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What's your view of A35? I really don't understand why it dropped 5% today...
It didn't. It dropped 4.15% today, or at least that's what Yahoo! Finance thinks.

The first thing to check is whether the Singapore dollar fell relative to, in particular, the U.S. dollar. It appears it did, by roughly 1% (eyeballing it). International investors in Singapore government bonds don't typically have a Singapore dollar-based perspective, so currency alone probably explains a little of that movement.

The second, more important thing to note is that Singapore government bonds have had a terrific run-up right through March 12 (yesterday). It shouldn't be too surprising that there's some profit taking going on. Bonds are up, stocks and REITs are down, so the sensible thing (one would think) would be to shift the former into the latter to restore particular desired portfolio allocations.

The third possibility is if A35 went ex-dividend.

The fourth possibility is that we have some margin traders getting margin calls who are desperately raising cash from anything and everything. That'll keep markets orderly, and that's a good thing.

The fifth possibility is that the Monetary Authority of Singapore intervened in its own sovereign bond market. I have no such information, but that's hypothetically possible.

I wonder if we can now cut the crap with the "MBH sucks, A35 ruuuulz!" posts. MBH was down 2.31% on the day.

Last edited by BBCWatcher; 13-03-2020 at 05:22 PM..
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Old 13-03-2020, 07:33 PM   #1926
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I don't think any of this is particularly strange. We have a sudden shock (COVID-19), a longer running shock (Trump), and both the stock and bond markets are reacting to these intersecting events as you'd expect, really.
I’m surprised if you view Trump as a shock to the market, unless you were joking. There are many who peddle falsehoods about a supposed cause and effect relationship between the sitting president and the economy. In reality, the sitting president has very little, if any, impact on the economy. Jay Powell on the other hand... he is front and center. Trump may pester him, but to no real effect. On a side note, do you really think Biden has a shot?
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Old 13-03-2020, 10:16 PM   #1927
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I’m surprised if you view Trump as a shock to the market, unless you were joking.
I'm deadly serious. A public health emergency requires effective, competent, steady leadership. Markets ignored that particular deficiency (correctly, I think) until it intersected a shock that would test even the best leadership.

In reality, the sitting president has very little, if any, impact on the economy.
Except on those rare occasions when the President has a big impact. Herbert Hoover is another example, then FDR after him (SEC, FDIC, Glass–Steagall, etc.) And how about Richard Nixon's wage and price controls and the end of Bretton Woods?

On a side note, do you really think Biden has a shot?
Absolutely.
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Old 14-03-2020, 01:15 PM   #1928
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Hi BBCW. Instead of traditional moneychanger, can I use IBKR to covert cash in SGD to cash of a different currency, say Australian dollar, for travel purposes? Will the rate be better than the traditional money changer? Is your answer is yes to both questions above, is it worthwhile to do so? Thank you.
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Old 14-03-2020, 01:58 PM   #1929
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Hi BBCW. Instead of traditional moneychanger, can I use IBKR to covert cash in SGD to cash of a different currency, say Australian dollar, for travel purposes? Will the rate be better than the traditional money changer? Is your answer is yes to both questions above, is it worthwhile to do so? Thank you.
Yes but how are you going to withdraw the AUD physically?
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Old 14-03-2020, 02:00 PM   #1930
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My monthly investments are never going stop, but that is into equities.

The idea behind the bond fund holdings was safety and yield. I’ve dumped a substantial amount into bond funds earlier this year, thinking they would not drop if equities did. They have now lost 12% of their value. The high yield portion lost 24%, pretty much in-line with the stock market. At least with the stock market, I can accept the risk because companies will emerge and earnings will grow... but with these bond funds? It seems like the loss due more to mechanics than fundamentals, with unknown recoverability.
Can you please let us know which are the bond funds you invested? This is a good time to study their portfolio and behaviour.
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Old 14-03-2020, 03:29 PM   #1931
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Instead of traditional moneychanger, can I use IBKR to covert cash in SGD to cash of a different currency, say Australian dollar, for travel purposes?
If you mean cash as in the nasty physical notes that you should be phasing out as rapidly as possible, no, not really. IB’s rates are excellent if you have some regular or semi-regular currency path with your own bank accounts on both ends, but it’s not a general purpose overseas spending vehicle as such. Get an ICBC Global Travel Mastercard if you want a reasonable way to spend Singapore dollars overseas (converted to local currency on the spot) everywhere Mastercard is accepted.
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Old 14-03-2020, 03:49 PM   #1932
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If you mean cash as in the nasty physical notes that you should be phasing out as rapidly as possible, no, not really. IB’s rates are excellent if you have some regular or semi-regular currency path with your own bank accounts on both ends, but it’s not a general purpose overseas spending vehicle as such. Get an ICBC Global Travel Mastercard if you want a reasonable way to spend Singapore dollars overseas (converted to local currency on the spot) everywhere Mastercard is accepted.
Haha. OK, thank you. I am being too creative.

Last edited by mr_beanz; 14-03-2020 at 03:51 PM..
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Old 14-03-2020, 06:04 PM   #1933
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Can you please let us know which are the bond funds you invested? This is a good time to study their portfolio and behaviour.
Fairly simple US municipal bond portfolio:

2/3 in MUB avg purchase $114.95/share
1/3 in HYD avg purchase $64.75/share

At the time of purchase (Dec’19-Jan’20) the blended yield was 3.0%. Given my expectations of lower interest rates, I expected bond prices to rise. Unfortunately the opposite has occured (at least the price of the bond fund, the underlying bonds may have risen in price).

When I search online for answers, they admit that these bond funds are not following their index benchmarks, and the excuse they give is that too many redemptions are creating a wedge. For large equity ETFs, this wedge is normally filled quckily by those in the arbitrage business. This bond fund issuer claims that this wedge normally closes within several weeks or months.

Honestly, this is not what I signed up for when getting into bonds. I can accept interest rate risk, duration risk and credit risk.. those are all fundamental to bonds, but this wedge risk was an unexpected and unwelcome side effect that seems to come with bonds funds.
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Last edited by celtosaxon; 15-03-2020 at 10:42 AM..
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Old 15-03-2020, 01:33 PM   #1934
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....At the time of purchase (Dec’19-Jan’20) the blended yield was 3.0%. Given my expectations of lower interest rates, I expected bond prices to rise. Unfortunately the opposite has occured (at least the price of the bond fund, the underlying bonds may have risen in price).
It's possible the municipal bond market believes there's a higher risk of default. That's a reasonable point of view, I'd say.

When I search online for answers, they admit that these bond funds are not following their index benchmarks, and the excuse they give is that too many redemptions are creating a wedge. For large equity ETFs, this wedge is normally filled quckily by those in the arbitrage business. This bond fund issuer claims that this wedge normally closes within several weeks or months.
That seems correct to me. The municipal bond market is rather lumpy and illiquid. It's certainly not like the U.S. Treasuries market. So if the fund has a spike in redemptions then it'll have to sell some of its bonds at less than patient prices.

But that's a reason to buy the fund now, right? Dollar cost averaging smooths that out.

Honestly, this is not what I signed up for when getting into bonds. I can accept interest rate risk, duration risk and credit risk.. those are all fundamental to bonds, but this wedge risk was an unexpected and unwelcome side effect that seems to come with bonds funds.
No, not all bond funds. It's a characteristic of municipal bonds and to some extent corporate bonds. A school district might issue S$10 million worth of a particular bond, for example. That's not a lot.

This'll be a short-lived factor, though. If this is a long-term investment, and if you genuinely should be investing in U.S. municipal bonds (i.e. you're in a high U.S. tax bracket), then you'd just keep dollar cost averaging your way through this, and it'll be fine.

Your other possible choice is to buy a "ladder" of individual, high quality municipal bonds that you hold to maturity, but that's really not something mere mortals can do.
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Old 15-03-2020, 05:47 PM   #1935
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Can explain which strategy is better if I got a sum of money to invest?

Invest X% of the sum every month for the next X months or invest X% of the sum every time the ETF drops X%?
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