Time to reconfigure bond holdings?

aroominyork

curious_squirrel said:

I'm too nervous about making the wrong move and worsening the situation so I am leaving my bond funds as they are.... And hoping this isn't a terrible strategy. I am wondering what the multi-asset type funds (Vanguard, L&G, etc) are doing? Are they rebalancing back into bonds?

Doing nothing is rarely a bad strategy.

Linton

Buying a single gilt guarantees you a fixed income and a maturity date when you are repaid a fixed amount.  The price between buying and maturity is totally irrelevent.  Better to regard it as an income stream rather than an accumulating investment with some level of risk.

Linton

curious_squirrel said:

I'm too nervous about making the wrong move and worsening the situation so I am leaving my bond funds as they are.... And hoping this isn't a terrible strategy. I am wondering what the multi-asset type funds (Vanguard, L&G, etc) are doing? Are they rebalancing back into bonds?

Vanguard Life Strategy and similar passive based fixed allocation funds ignore the economic situation.  The simply rebalance  the predefined %s when necessary.  Other multiu-asset funds, eg HSBC and L&G are risk based and adjust the allocations over time depending on the state of the market.

aroominyork

Linton said:

Buying a single gilt guarantees you a fixed income and a maturity date when you are repaid a fixed amount.  The price between buying and maturity is totally irrelevent.  Better to regard it as an income stream rather than an accumulating investment with some level of risk.

Exactly - holding to maturity takes risk out of the picture. But I don't see a 0.5% coupon as an income stream; it's more like a fixed term savings account that pays the interest on maturity.

hallmark

Frequentlyhere said:

Of note that UK gilts appear to be sinking back down to almost the levels seen when BOE first intervened.

I'm just looking at VGOV as a proxy and the price has sunk near 5% this week. I wonder if we'll see a sharp uptick again as the BOE pump up the price once more, or if won't work like that?

Not seen much written about this but according to fullfact the BOE intervention is only a fraction of what was reported / widely understood to be the case: https://fullfact.org/economy/bank-of-england-65-billion-gilts-mini-budget/

masonic

hallmark said:

Frequentlyhere said:

Of note that UK gilts appear to be sinking back down to almost the levels seen when BOE first intervened.

I'm just looking at VGOV as a proxy and the price has sunk near 5% this week. I wonder if we'll see a sharp uptick again as the BOE pump up the price once more, or if won't work like that?

Not seen much written about this but according to fullfact the BOE intervention is only a fraction of what was reported / widely understood to be the case: https://fullfact.org/economy/bank-of-england-65-billion-gilts-mini-budget/

Yes, it was always likely that the reassurance given by the BoE would itself go a long way to breaking the self-reinforcing downward spiral in gilt markets triggered by the mini-budget and pension funds being forced sellers due to margin calls on their hedging contracts. This, along with the partial u-turn has saved us from the BoE having to pivot on its tightening policy, although it's delayed the start of QT. Essentially there were just 3 days of material purchases, all well below the £5bn per day upper limit. With just one week to go, this will hopefully be a very minor bump in the road for their action to curb inflation. The latest yield curve looks a lot more healthy too.