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37 votes

Why doesn't my bond ETF provide a hedge against stock indexes in the way I thought it would?

I read an article about this very issue in January 2023, and I saved the graphic that illustrates the historical relationship between the S&P 500 as an indicator for equities and the 10-year U.S. ...
MTA's user avatar
  • 1,499
35 votes
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Why is this T-Mobile bond priced so low?

According to this site and other non-public data I have access to, this bond was redeemed early in 2021. It's not clear where the quotes that BusinessInsider is coming from, but the bond is not ...
D Stanley's user avatar
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10 votes

Why doesn't my bond ETF provide a hedge against stock indexes in the way I thought it would?

For perfectly hedged investments the investments would be perfectly anti-correlated, i.e. if the value of investment A goes down, the value of investment B goes up an equivalent amount, and visa versa....
Charles E. Grant's user avatar
7 votes

If loans are sold at discount to other lenders, why isn't the same offer given to the debtor for payoff?

Why wouldn’t the payoff amount of the loan be discounted similar to a bond with lower yield than current market rates. You're confusing the yields to investors with debt obligations. When a bond is ...
littleadv's user avatar
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6 votes
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Why Wouldn't A Bond Issuer Call A Bond When Rates Fall?

Two main reasons: The bond is callable, but it has a "make whole" provision, which means that the issuer does not just pay the par value when calling the bond, but it must pay the PV of all ...
D Stanley's user avatar
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6 votes
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Why is bond issue price lower than 100?

Easy answer first, 100 is paid back at maturity. The reason it is issued at another price than 100 is market circumstances and market interest in the bond. Typically bonds are issues at "nice&...
Paul Palmpje's user avatar
5 votes
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If loans are sold at discount to other lenders, why isn't the same offer given to the debtor for payoff?

Theoretically, this could certainly work. Practically, however, it doesn't. The bank that originated your loan almost certainly packaged your loan with hundreds of other loans and sold it to an ...
Justin Cave's user avatar
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5 votes
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What is the probability of each tier of creditor/equity claims being made whole?

The probability depends on a number of things and the best guides are the credit rating and the recovery curve for the credit rating or company. The quants spend a lot of time building out models for ...
MD-Tech's user avatar
  • 9,025
5 votes

is the treasury bill portion of a bond fund subject to state/local taxes?

I'm assuming this is a question about US taxation, from the context. You'll need to check how your State handles this situation, it may differ from State to State. Here's a quote from the California ...
littleadv's user avatar
  • 177k
5 votes

How to estimate the price of a US Treasury

The price is the present value of the coupon payments and principal payment at the end, so it depends on the discount rate(s) you choose. In practice, the price is due to supply and demand, and ...
0xFEE1DEAD's user avatar
  • 8,498
5 votes

Interest rates effect on bank jobs and junk funds from the book intelligent investor

If I work in a bank and interest rates are rising then how can it put me in a job security risk since banks will have more profits with higher interest rates and there is not need for employee layoff. ...
littleadv's user avatar
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5 votes
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Yields and prices when consider demand and supply

Interest rate changes do not affect the yield of bonds already sold. If the interest rate goes down, bonds with the older interest rates only increase in value because there will always be higher ...
ArdurA BANGARANG's user avatar
5 votes

Why does SGOV pay dividends twice in December?

I can't see anything specific in their prospectus that indicates the reason, but with other funds, I often get a larger distribution in December for capital gains in addition to the quarterly ...
D Stanley's user avatar
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5 votes
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Is the yield of a 30-year bond, issued 29 years ago and maturing in 1 year, equivalent to that of a 1-year bond maturing on the same date?

In theory, since there is no credit risk, you should expect to get the same yield as a newly issued 1-year bill and a 30-year bond with 1 year remaining. In practice, however, there is a liquidity ...
D Stanley's user avatar
  • 137k
4 votes
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US Treasuries, explanation of numbers listed in IBKR

What I've read is that the treasuries will in principle start at a price of 100-interest, e.g. 95 with 5%, and will get liquidated at 100 on the maturity date. In this case, yes, because these are ...
D Stanley's user avatar
  • 137k
4 votes
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Why is the price of a 1 year to maturity bond so high?

"Normal", bonds have a initial face value (the value that you get back at maturity) that is fixed, so the price quoted generally stays somewhere around that value. Bonds are also often ...
D Stanley's user avatar
  • 137k
4 votes
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For this I-bond calculation there's a tiny adjustment to the rate (fixed rate x semiannual inflation rate) it barely changes the rate.Why is it there?

The last term of the formula makes up for the loss of value of the fixed rate interest due to inflation. The thread you linked to actually already contained that information, but probably not clear ...
Solarflare's user avatar
  • 2,648
4 votes
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If interest rates remain the same, what effect would this have on long term treasuries?

No one can say for certain, since long-term interest rates are essentially the market's projection of what short-term rates will do over that time. So even if short-term rates don't move, the ...
D Stanley's user avatar
  • 137k
4 votes

Does the capital gains tax apply this tax year or next if I initiated a sale today but it won't complete until the new year?

I-Bonds are not traded, you redeem them with the Treasury. As such, the transaction is based on their redemption schedule, usually the next business day. The next business day from today will be in ...
littleadv's user avatar
  • 177k
4 votes

Where to find the variable interest calculation formula for a bond?

For government bonds, the government releases that information, usually for a whole class of bonds (e.g. all semianually bonds with variable rate may work the same way). For Italy, their Department of ...
Solarflare's user avatar
  • 2,648
4 votes

Is it feasible for a small retail UK resident to buy UK inflation-linked GILTs directly from the issuer?

The DMO Approved Group of Investors scheme is administered by Computershare, and an application form for individuals can be downloaded from their website. The form itself asks for standard KYC ...
JayFor's user avatar
  • 261
4 votes

How to reconcile bond duration with yield responses in Long-Term vs Short-Term bonds?

Your question refers to "interest rates" without specifying which interest rates you are talking about. Short and long term bonds are priced relative to short and long term interest rates ...
Brian Borchers's user avatar
4 votes
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Do Treasury Inflation Protected Securities (TIPS) pay variable interest?

The coupon rate is fixed, but because of the adjustments to the principal because of the inflation the interest amount will vary. Note that the quote says "The interest payments will increase...&...
littleadv's user avatar
  • 177k
3 votes
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What's the benefit of buying municipal bonds on the secondary market?

Yes, capital gains from the sale or redemption of municipal bonds is taxable; it's just the interest that is tax-free. Even then it's typically only state-tax-free in your own state. States often ...
D Stanley's user avatar
  • 137k
3 votes

For this I-bond calculation there's a tiny adjustment to the rate (fixed rate x semiannual inflation rate) it barely changes the rate.Why is it there?

The composite rate is reported as an annual rate, but the interest is actually compounded semiannually. Thus at the end of the first half of the year, you get to collect interest on the amount at the ...
Brian Borchers's user avatar
3 votes

Optimizing between Mortgage and Bonds

it seems like because mortages are simple interest and GICs are compound, No, mortgages are compound interest. If you were to not make any payments, then the amount owed would grow at an exponential ...
Acccumulation's user avatar
3 votes

Why doesn't my bond ETF provide a hedge against stock indexes in the way I thought it would?

The concept of using bonds as a hedge against stock market declines is based on observations during periods where interest rates are relatively stable. A common theory is that when the market turns ...
JimmyJames's user avatar
  • 3,878
3 votes

Is it feasible for a small retail UK resident to buy UK inflation-linked GILTs directly from the issuer?

The requirements you linked are only to buy gilts directly from the UK Debt Management Office (probably to reduce counterparty risk and overhead) but there is a secondary market for gilts. You can ...
D Stanley's user avatar
  • 137k
3 votes
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treasury bond future confusion

The way bond futures work, there will be several different Treasury bonds that are eligible for delivery on the futures expiry date. You won't know the exact coupon, but they will all have maturities ...
D Stanley's user avatar
  • 137k
2 votes
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betting on rates going down using bonds

What you described is, indeed, the essence of what a simple bond-shorting strategy would look like. (As for what follows, normal caveats apply that this shouldn't be construed as investment advice, ...
user68318's user avatar
  • 374

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