1Yr·

Bond Invest Update 2


#anleihen


As already announced, anyone who is interested can follow my investment in bonds.


Due to the surprisingly clear announcement of the interest rate cut next year by the FED, I was forced to implement my strategy a little faster before the wild ride takes off without me! 😊


New order settlement new luck! (2/3) 😊


Link to the dashboard: https://app.getquin.com/dashboard/eNaHkgNkAu

14.12
ITALY, REPUBLIC OF (GOVERNMENT) 4.5% 23/53 logo
Bought x€6,000.00 at 101.56%
€6,093.60
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16 Comments

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Cool, a completely different strategy here than the usual dividend-growth bitcoin stuff 🤪 To be honest, I don't know much about government bonds, but it sounds interesting. Happy to share a few more thoughts from you. 👍
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@Dividenden-Penner In short, when interest rates fall, bond prices rise. The longer the remaining term of the bonds, the stronger the price movement. I have already written a little more about my motivation here https://app.getquin.com/activity/kqCQArQMZD . The best time to enter the market would have been mid-October. The clear announcement by the FED surprised me and "forced" me to act! 😂
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I also think it's a nice change to see a pure bond portfolio. I have a few questions: 1. are the bonds your entire investments or just part of them? If complete, the question of asset class diversification and cluster risk immediately arises. 2. what is your strategy? How do you select the countries, the maturities, the weightings? When do you get in, when do you get out? 3. why don't you use a bond ETF? This gives you a higher diversification and you can take the interest rate reduction cycle directly with you.
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@Epi
1. no, of course they are only a part. At the moment I'm switching a portion from ETFs to bonds. Seems more promising to me in the near future. 2. half to max. 2/3 USA, the rest Europe or Eurobonds. 30+ years. In Europe then spread over several countries. Well, now is the time to get in after the clear FED announcement. Prices have actually been rising since mid-October. I got in with the first large sum at the beginning of the week and then the FED surprised me and put me under pressure to move. I'm taking the interest with me until interest rates reach a bottom at "normal levels" and will then hedge it with a narrow SL. 3. I'm now taking it for the monthly savings installment from January. The trading costs would be too high for 1k+ and I wouldn't have enough time in the market to save up.
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I am invested in 20+ year US and 25+ year Eurozone government bonds via ETFs. I started building up positions in October. I expect a lot from this in 2024.
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@BaxMor I also had my first small position in October and wanted to build up my positions by next spring. Due to the clear FED announcement, I had to accelerate this now! 😂
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@BaxMor By the way, which ETFs do you have? I've noticed $IBTL so far. I will probably sink my monthly savings installment into it next year.
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@kleberj $IBTL is the classic, $DTLA the therausierende Pendant.
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I have the $IBTL and $DBXG
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Interesting. What does @Epi think about this?
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Your strategy is really interesting! 👍 I have two questions: 1. why has the $DBXG with euro bonds risen more than the $DTLA with US bonds, although the ECB has made no statement about interest rate cuts, but the FED has held out the prospect of three? As I understand it, it should be the other way around. 2. do you not expect a possible countermovement/correction after the significant rise since October? In the case of equities, this would presumably be taken into account. Or are your purchases only 1st tranches?
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@ChrisBizz I don't know exactly what's in the ETFs and haven't looked into it. That's why I don't want to speculate. There can always be minor setbacks. I expect a slow but steady rise until the interest rate cuts actually come. The Fed has clearly stated what will happen next year. The money is on the street, you just have to pick it up. And it won't stay at 0.75%.
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@kleberj I have just seen that euro bonds are 25+yr, US bonds 20+yr. I would wait for a setback to a Fibonacci retracement in equities. But with bonds, I don't know how to categorize such movements.
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I would like to discuss the hope of price gains. The link shows the current yield curve in the eurozone: https://www.ecb.europa.eu/stats/financial_markets_and_interest_rates/euro_area_yield_curves/html/index.en.html 20-year AAA-rated government bonds yield approx. 2.5% (all bonds 3.3%). I interpret this as follows: 1. sooner or later the yield curve must invert again, i.e. long-dated bonds will yield more than short-dated bonds. The market has priced this in. 2. Currently, the deposit rate for 20y Euro AAA bonds would have to fall below 2.5% for the current yield curve to allow further large price gains, and only if we assume that interest rates will continue to fall. Hence my question for discussion: What are the arguments for the hoped-for rally?
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@RT270 Let me take the two US bonds I have already bought (https://www.finanzen.net/anleihen/a3lqvl-us-staatsanleihen-anleihe , https://www.finanzen.net/anleihen/a3lhra-us-staatsanleihen-anleihe). Both are broadly comparable. The maturity of one of them is half a year shorter, but that doesn't really matter. Not surprisingly, both have a very similar yield to maturity of around 4.1%. This is roughly what is currently achievable for 30-year US bonds. See https://www.finanzen.net/anleihen/us-staatsanleihen?orderBy=BondList:MaturityDate:desc ! Both have a coupon of 4.75% and 3.625% respectively. To get both to the current interest rate level of 4.1%, one has a market value of 112% and the other of 92%! If we now assume that in a year's time the current interest rate level will be 3%. What will happen to the prices then? Since the coupon is fixed, only the other variable can be adjusted. The price must inevitably rise in order to bring the yield to 3% at maturity. This is not witchcraft or voodoo, but the result of a functioning market. The stock market is simply not a communist-style bond issuer according to a five-year plan. Nobody will buy the 3% bond if they could have the 4.1% bond for a 10% premium. That is simply math. That's why the market price is equalized to the yield to maturity. And I wouldn't sell my bonds at these prices either, as I would have a much higher yield by holding them!
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@kleberj I know how bonds work, but I think it's good that you've summarized it again, then we're both talking from the same basis 👍 In the end, you've already given me an answer as to why you believe in a rally. If the deposit rate falls to 3%, you hope that it will also fall at the long end. You are assuming an interest rate cut of around 2.25% from the current level, which I find extremely sporting. Furthermore, due to the inverted yield curve, this does not mean that interest rates at the long end will also fall (sharply) and thus lead to the hoped-for price increase. This is because future interest rate cuts are already expected and priced in by the market. The rule of thumb interest rate change*duration = price change only works with a normal upward sloping yield curve. In addition, US bonds have a currency risk/opportunity that is not normally remunerated. But since nobody can see into the future, I'll keep my fingers crossed and hope for strong returns!
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