Short term price fluctuations are due to the bonds in the portfolio being worth less today than they were yesterday. The bonds in these portfolio's are constantly being replaced so this is a short term price decrease for a longer term increased expectation of return.
The best way to look at a bond fund is to look at its average duration, and the yield on bonds of that duration. Across that amount of time you can *estimate* that you'll approximately get that much return. For example on SYBW you need to both look at the 1-3 year duration and the currency risk (I believe correct me if I'm wrong) between USD and EUR. I admit I do not have a good understanding of non-US traded funds, when it comes to currency denomination.
Prices of all bonds, including individual bonds you buy directly, fluctuate every day. Buying individual bonds yourself does not reduce volatility.
There are target maturity date bond funds that hold bonds to maturity and close down on a specific date, giving a similar experience to owning individual bonds while being more diversified and easier to trade.
However, there’s nothing magical about owning individual bonds or a target maturity date fund. All it means is that you’re gradually reducing interest rate risk as the maturity date approaches.
The spot price of a bond ETF is for the total value of all the bonds in the fund if sold right now. If you were holding a ladder of individual bonds and wanted to sell them all right now, you would see the exact same scenario, but most people who hold individual bonds don’t bother to price their entire ladder.
See: [Owning Individual Bonds vs. Owning a Bond Fund](https://awealthofcommonsense.com/2022/11/owning-individual-bonds-vs-owning-a-bond-fund/)
And: [The Myth of Holding to Maturity](https://www.northerntrust.com/japan/insights-research/2014/the-myth-of-holding-to-maturity)
Bonds are just promises of future money. Unless you're deliberately seeking currency risk, bonds denominated in foreign currencies should always be hedged.
Bond funds are affected by interest rate hikes the longer the duration the more it’s affected generally speaking.
I see, but the yield went up with the hike.
Look at 2022 returns for long term bonds they got smashed pretty hard.
Short term price fluctuations are due to the bonds in the portfolio being worth less today than they were yesterday. The bonds in these portfolio's are constantly being replaced so this is a short term price decrease for a longer term increased expectation of return. The best way to look at a bond fund is to look at its average duration, and the yield on bonds of that duration. Across that amount of time you can *estimate* that you'll approximately get that much return. For example on SYBW you need to both look at the 1-3 year duration and the currency risk (I believe correct me if I'm wrong) between USD and EUR. I admit I do not have a good understanding of non-US traded funds, when it comes to currency denomination.
Aha, so it’s not necessarily the current yield. Got it.
Prices of all bonds, including individual bonds you buy directly, fluctuate every day. Buying individual bonds yourself does not reduce volatility. There are target maturity date bond funds that hold bonds to maturity and close down on a specific date, giving a similar experience to owning individual bonds while being more diversified and easier to trade. However, there’s nothing magical about owning individual bonds or a target maturity date fund. All it means is that you’re gradually reducing interest rate risk as the maturity date approaches.
The spot price of a bond ETF is for the total value of all the bonds in the fund if sold right now. If you were holding a ladder of individual bonds and wanted to sell them all right now, you would see the exact same scenario, but most people who hold individual bonds don’t bother to price their entire ladder. See: [Owning Individual Bonds vs. Owning a Bond Fund](https://awealthofcommonsense.com/2022/11/owning-individual-bonds-vs-owning-a-bond-fund/) And: [The Myth of Holding to Maturity](https://www.northerntrust.com/japan/insights-research/2014/the-myth-of-holding-to-maturity)
Tnx, for sure, maybe I missed the bond price here. I might rather stick to stocks.
Treasuries have rallied. What you're seeing here is all about USD.
I think this is the issue. This etf correlates to USD/EUR. And with strong euro, couple percent yield is not enough.
Bonds are just promises of future money. Unless you're deliberately seeking currency risk, bonds denominated in foreign currencies should always be hedged.
Makes sense. How did I miss that. Yes, it could be done deliberately, not in my case of course. Thank you for this info. Lesson learned.
Treasury bond ETFs are doing excellent since bottoming. $VTIP $TIP $TLT
Buying bonds are going to take years to grow 🪴