@pizzaman Have you seen this blackrock series of ETFs that hold a bunch of bonds with fixed maturity, eliminating interest reinvestment risk?
https://www.ishares.com/us/strategies/bond-etfs/build-better-bond-ladders
@pizzaman Well, the rising yields aren't something to celebrate. Bonds are always contrary to face logic like that. The rising yields on the ten year, almost to 5%, are an ominous harbinger and why Trump caved on some tariffs last week (yet again). In the midst of a precipitous market drop, those rising yields showed that instead of the traditional running to safe US treasury bonds (which would cause yields to drop), the world was running *away* from US treasuries.
The questions isn't "what US treasury maturity should we select," it's "should we be in US treasuries." The world is quickly running from the dollar due to our insane tactics and back-and-forth instability. They're looking to use their own currency standard, and forming trade deals among themselves. We've bickered on the usefulness of being in international ex-US funds like VXUS vs being all-in VTI/US, and also for fixed income - BND vs BNDX. Vanguard always had a healthy allocation to international in both sides of asset allocation. Seems they were the smartest kids in the room. BNDX is hedged, so doesn't completely solve that problem either.
People say, "Well my US investment in VTI does plenty of foreign business." Sure, except when our tariffs make that distasteful/too expensive and our tactics lead us to being boycotted around the world, US goods pulled from their shelves as they are now. There goes that logic.
So, in response to your question, in general, bond funds are essentially ladders, but you don't control them. Your own ladders are better, as long as you mange them correctly, and have the acumen and time to do so, and it's something you want to be spending your precious time doing. Don't forget to not leave your spouse/partner a complicated mess if you get hit by a bus, or you'll be undoing your hard work as they're fed to the advisor/insurance vultures as they don't understand it.
Perhaps another tactic solves both problems: https://en.m.wikipedia.org/wiki/Interest_rate_parity
Hey Bill, not quite the analysis I was looking for (said Obi Wan Kenobi). I have put together a US Treasury bond ladder and plan to have the treasuries go to maturity. I know exactly what my bond ladder will pay out and when and I personally have no problem managing it. I know there is the issue of future inflation, but that's another story. I brought up that ETF for people who do not want to develop the ladder themself and then manage it. If this ETF keeps its treasuries until they mature, and you want predictable payouts, would that make this ETF a good idea?
@hines202 (Until he fixes it, I do notice that things post even after getting that error. If you refresh on a separate tab and still don't see your post, then repost but e.g. you posted 3 times cause you got the error and thought it didn't post.)
@pizzaman The Blackrock fixed maturity EFT series are superior I think to the one you posted. Did you get a chance to compare? They cover a lot of different types of bonds and are designed to simulate ladders of individual bonds.
@pizzaman Sorry about all the posts, on top of the egregious wait time after hitting Add Reply, the site was taking 502 errors so it seemed my posts weren't going through. I cleaned those up.
Anyhoo, Ok so my first thoughts on something like this is who is this LifeX I'm considering trusting? I'm more inclined to trust the BlackRock name, per @jkandell. As I often say, why take risk when you're not spending your money in your lifetime? Why chase every new shiny thing, unless you are truly on the edge of success and need to push over the top? I know it's an enjoyable hobby for some, and that's a good enough reason. Most folks I deal with just want to go on vacations 🙂
Trust is one thing, especially these days with the guardrails that protect us crumbling, not to mention the trust in US bonds/dollar. The concept of allowing the bonds to always mature is interesting, rather than a constant rolling bond "ladder" in a typical bond ETF like BND/BNDX. This is all treasuries though, so there's now inflation risk. Are we also sure they're not callable? Those fees are high compared to a typical .03% for BND or VGIT.
But again, my concern right now is putting long-term trust in what lately seems to be a very erratic country's debt instruments, led by a guy who's notorious for defaulting on debt and may very well do so as a last resort when this insane tariff gambit fully implodes. I'm sorry about the political inference, but it's very, very relevant here and top of mind obviously to the world, as we saw the lack of confidence last week. I have every.single.client very concerned about this right now, even those who voted for him.
I looked at it a little bit as I am not going to get any of those or the ETF I brough up as I already have my US Treasury bond ladder set up. Anyway, they definitely have lower expense ratios. I found it hard to determine exactly how they pay out. Does it very month/year to month/year or what.
From the web page:
Why IBTK?
1. Provides access to a portfolio of U.S. Treasury bonds. Get exposure to a portfolio of U.S. Treasury bonds maturing between January 1, 2030 and December 15, 2030 through a single ticker.
Not quite what I would call a bond ladder if it only contains Treasures that mature in the same year??? That implies that the payout is in 2030??
@pizzaman Yah, they are designed to provide the original yield-to-maturity ("YTM") profile comparable to that of the underlying bond portfolio. The funds seek to preserve an investor’s anticipated yield-to-maturity through a combination of monthly distributions and a final end-date distribution. Each month they pay dividends derived from the coupons, and upon the maturity date they all get sold at the NAV. I've not used them myself, but am considering them for some of my ladder to keep liquidity. They seem like a nice product, and I like that they have low expenses and cover different types of bonds and maturities.
