Bonds!

[tede02]

I'm starting to consider short-term TIPS (probably via STIP) for idle cash. Real yields are 1-1.4%. If CPI does push north of 3.5%, that would be pretty attractive. 

[TwoCitiesCapital]

On 3/4/2026 at 6:14 PM, wabuffo said:

TwCitiesCapital...

 

That's a small change - and as I said, the Fed wants to get total reserves to $3t.  At the end of Dec, 2025, total reserves were at $2.85T.   The Fed has gotten them back to target which gives context to the small change since end of year.

 

Bill

 

On 3/4/2026 at 8:16 PM, TwoCitiesCapital said:

I never said the change was large. But it's a change in trend which is worth noting after 4-years of consistent continual contraction (barring the 2023 bank failures). 

 

Continues to rise - back to levels from a year ago. 

[wabuffo]

Continues to rise - back to levels from a year ago. 

 

Bank reserves are still stubbornly under the Fed's $3T target.  This is the level the Fed believes is a minimum level in order for the Fedwire value transfer/payment clearing system to function properly while also permitting the Fed to control its target interest rate.

 

 

You can see the rise in Fed o/n repo (i.e, Fed lends reserves in exchange of Tsys/Agency MBS) in late 2025 around Nov, again in Feb and a small spike on tax receipt day (Apr 15). If you look at a graph of reserve balances, this demand for o/n repo matches up pretty well generally with total system reserves falling below $3T.

 

I would also reiterate the growth in two Fed b/s liabilities that the Fed doesn't control - 1) currency in circulation which grows organically year after year, and 2) US Treasury general acct which is swelling to over $1T due to seasonal inflows of tax receipts in April (also reducing reserves temporarily).

 

Less to do with QE and more to do with well-functioning monetary plumbing.

 

Even so, its a 2% increase from the lows of six months ago.  Pretty ho-hum.

 

FWIW,

Bill

Edited April 27 by wabuffo

[TwoCitiesCapital]

I think a 6+ month reversal in a multi year trend that was basically uninterrupted is more signal than noise

[tede02]

10 year yield is back to its high for the year. Pretty remarkable with rates up and oil moving up materially, equities just keep shrugging it off. No big deal. 

[Hoodlum]

19 minutes ago, tede02 said:

10 year yield is back to its high for the year. Pretty remarkable with rates up and oil moving up materially, equities just keep shrugging it off. No big deal. 

 

I have found that bonds usually lead equities during economic shifts.   We will see if the higher yields hold or go higher in the coming days.

[Gregmal]

[Eldad]

2 year at 4% today

[Hektor]

I think the 20 was above 5 yesterday. I wonder if @gfpis picking some.

[gfp]

20 and 30 year are both at or above 5%.  I think the 2 year when it offers more than 4% is a better deal but you won't make a capital gain.  Pretty interesting that Trump got his guy confirmed, he starts in two days, and the 2 year is yielding quite a bit more than t-bills.

 

I'm more bullish on the US economy than I was when I was interested in trading the long bond moves.  There are much better ideas out there

[Gregmal]

Agreed, theres tons of great businesses attractively priced. I continue to be perplexed why people fixate on bonds moving around "in the 4s/5s"....

[frommi]

On 5/14/2026 at 1:21 AM, Gregmal said:

Agreed, theres tons of great businesses attractively priced. I continue to be perplexed why people fixate on bonds moving around "in the 4s/5s"....

I wouldn't be surprised if we see a 6s handle on the 10y soon.

[gfp]

2 hours ago, frommi said:

I wouldn't be surprised if we see a 6s handle on the 10y soon.

 

I'll take the other side of that bet and I don't even need you to define "soon"

[Gregmal]

Theres just always an awful lot of hysteria around what are relatively minor moves in fixed income. Whether it be "look at all the extra interest! It's a big number!" or "the bond market is breaking"....just always something. If we see 6....Im sure we'll all get on with our lives. 

[frommi]

Of course, but maybe i do a little dance party first

[Eldad]

Gundlach always says the FED eventually has to follow the 2 year. 2022 was not a good year. A hike later this year would be very bad for equities I would think. But yes life would go on. 

[Gregmal]

8 minutes ago, Eldad said:

2022 was not a good year.

In what regard? 2022 I feel like is one of those harbingers for investor maturity. 2022 was like an all you can eat buffet for anyone looking to invest. I feel like the people whom talk about 2022 negatively are almost always ones whom shit the bed performance wise from 2023-present.
 

Stocks/markets don’t only go up or down. Ya gotta be flexible and prepared for opportunities, always. You always have to be willing to swing. There’s nothing on the horizon that really gives me pause with respect to that outlook. 
 

This thread I’ve kind of come to appreciate because in between all the “rah rah bonds are approaching 4/5” commentary, it’s like “how much money have you left on the table fretting over….something pretty meaningless?”.

[Eldad]

Yeah I bought a lot then and would again. Just something to talk about day to day. Money comes in sometimes when you don’t want it to and it has to be redeployed. It makes it worth thinking about if I might get a better price a little later. 

[SharperDingaan]

Changing yields don't matter if you're holding to maturity, and/or it is part of an ALM strategy. For those seeking gains, the alternates range from a zero-coupon ETF, through an extended bond fund hold during a period of falling interest rates. Higher expertise required, the more risky one wants to get.

 

The whole world is refinancing/borrowing big, and is expected to continue doing so for at least the next few years. Have to think that interest rates go higher, and bond prices go lower, simply 'cause of global supply/demand. Could care less whether it's a result of higher inflation, worsening ability to repay, etc.

 

Lot of equities (common & preferred) have dividend yields comparable to bond yields; fixed income is not limited to bonds. Hence, owning bonds as a separate asset class allocation, really comes down to margin ability; 90%+ for a state/provincial/fed bond, vs 70% for a high quality equity ... that doesn't change much even in a 40%+ market sell off. 

 

Not what most want to hear.

 

SD

Edited May 15 by SharperDingaan

[Spooky]

4 hours ago, Gregmal said:

n what regard? 2022 I feel like is one of those harbingers for investor maturity. 2022 was like an all you can eat buffet for anyone looking to invest.

 

Man, I miss 2022, it was like shooting fish in a barrel. 

[tede02]

2022 was a fun year for both equities and fixed income. On the fixed income side, I grabbed some TIPS when real yields surged past 2%, a bunch of CDs at 5%+ and a Doubleline bond ETF that was yieldling like 12% at the time. I'm still bummed I missed Facebook at the bottom in November 2022. Had a limit order in on long calls that just missed getting hit. 

[Intelligent_Investor]

On 5/15/2026 at 9:22 AM, Gregmal said:

In what regard? 2022 I feel like is one of those harbingers for investor maturity. 2022 was like an all you can eat buffet for anyone looking to invest. I feel like the people whom talk about 2022 negatively are almost always ones whom shit the bed performance wise from 2023-present.
 

Stocks/markets don’t only go up or down. Ya gotta be flexible and prepared for opportunities, always. You always have to be willing to swing. There’s nothing on the horizon that really gives me pause with respect to that outlook. 
 

This thread I’ve kind of come to appreciate because in between all the “rah rah bonds are approaching 4/5” commentary, it’s like “how much money have you left on the table fretting over….something pretty meaningless?”.

2022 was one of the best years ever for value investors. Hell, just loading up on big tech you would've made a killing. 

[thepupil]

I couldn't resist some 30 yr TIPS for mom's IRA today at 2.85% real...selling one of my more rate sensitive stocks at ATH's to buy....it's tough because i still think that this stock is cheap on a 5-10 yr basis and will probably do better than the bond, but i just kind of have  to buy long term inflation protection as it gets cheaper and am coming from a place of owning little bodns at this time. 

 

@2%-4% CPI = 5% to 7% carry from cash + principal accretion

 

if trades to 5% real yield, 33% downside

if trades to 4% real yield, 20% downside

if trades to 2% real yield, 20% upside

if trades to 1% real yield  50% upside

0% = ~90%

 

Edited May 19 by thepupil