Excellent episode. So interesting that forward rates are about discount rates (including risk premia) and have no forecasting information about future rates. Fama's paper also mentions tge forward premium puzzle:sudden increase
I'm grateful for the expertise here as 2021 has made me realize not only do I not understand bonds well, but I actually held many wrong ideas about them. If there is any way to distill some of the different points into 10-15 minute, digestible explainers, I would be much obliged.
The fundamental question is to what degree do governments and central banks determine the returns fixed income investors get? The returns equity investors get seem less determined by government policy. Heavily indebted governments seem likely to keep real interest rates as low as possible (financial repression).
If interest rates depend on the supply of money and the supply of debt what controls the supply of money used to bid on debt? Banks (including central banks) turn debt into money so it would seem that the rate at which they generate money must have some effect on interest rates. When the Fed engaged in massive purchases of Treasuries that sent interest rates falling all across the yield curve.
I'm probably too late but I have a few questions. 1) There is a common argument that individual bonds are superior to bond funds because bond funds do not mature but rather change price with interest rates every day. Is this a good argument or is there a deeper logic that disproves it? 2) I am considering a bond allocation strategy of buying 5 × the 10 yr US Treasury Rate every time I buy bonds. I rebalance every year. The theory is that the Federal Reserve is ultimately the dog that wags the tail. Would this strategy work? How can I further research this strategy if it's a "maybe?"
I think you can already drop the line "for canadians" :D Lovely podcasts! I enjoy it a lot!
Excellent episode. So interesting that forward rates are about discount rates (including risk premia) and have no forecasting information about future rates. Fama's paper also mentions tge forward premium puzzle:sudden increase
I'm grateful for the expertise here as 2021 has made me realize not only do I not understand bonds well, but I actually held many wrong ideas about them.
If there is any way to distill some of the different points into 10-15 minute, digestible explainers, I would be much obliged.
I never comment but I have to say, loved this guy! Learned so much and that last answer...so wise!
The fundamental question is to what degree do governments and central banks determine the returns fixed income investors get? The returns equity investors get seem less determined by government policy. Heavily indebted governments seem likely to keep real interest rates as low as possible (financial repression).
Love your question about active management Cameron 😂
If interest rates depend on the supply of money and the supply of debt what controls the supply of money used to bid on debt? Banks (including central banks) turn debt into money so it would seem that the rate at which they generate money must have some effect on interest rates. When the Fed engaged in massive purchases of Treasuries that sent interest rates falling all across the yield curve.
I'm probably too late but I have a few questions.
1) There is a common argument that individual bonds are superior to bond funds because bond funds do not mature but rather change price with interest rates every day. Is this a good argument or is there a deeper logic that disproves it?
2) I am considering a bond allocation strategy of buying 5 × the 10 yr US Treasury Rate every time I buy bonds. I rebalance every year. The theory is that the Federal Reserve is ultimately the dog that wags the tail. Would this strategy work? How can I further research this strategy if it's a "maybe?"
Great podcast!
Thanks, I learned a lot.
Does anybody have a link to a model portfolio with Dimensional ETFs?