Real Return Bonds

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par4
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Real Return Bonds

Post by par4 »

Is now the time to look at purchasing Real Return Bonds? Back in the 70's I did quite well with RRB's. I believe inflation may have been the reason.
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adrian2
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Re: Real Return Bonds

Post by adrian2 »

par4 wrote: 29 Jan 2018 19:57 Is now the time to look at purchasing Real Return Bonds? Back in the 70's I did quite well with RRB's. I believe inflation may have been the reason.
Are you sure they existed in the 70's?
AFAIK, first ever RRB's were issued in 1998.
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ghariton
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Re: Real Return Bonds

Post by ghariton »

adrian2 wrote: 29 Jan 2018 20:38 AFAIK, first ever RRB's were issued in 1998.
1991, I believe. The 2021 was originally a 30-year bond.

George
The juice is worth the squeeze
2of3aintbad
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Re: Real Return Bonds

Post by 2of3aintbad »

ghariton wrote: 29 Jan 2018 21:51
adrian2 wrote: 29 Jan 2018 20:38 AFAIK, first ever RRB's were issued in 1998.
1991, I believe. The 2021 was originally a 30-year bond.

George
It seemed at the time that 2021 was so far in the future. Now it is less than 4 years to maturity. I too am looking at RRBs again.
fireseeker
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Re: Real Return Bonds

Post by fireseeker »

XRB was down 5.8% today. (Could be less on a NAV basis; I haven't seen that number yet.)

On March 6, it closed at $26.80. Today, it closed at $22.51. That's a 16% drop in six trading days.

There has been discussion in other threads about disruptions in the bond market, with the focus mostly on corporates, and mostly on BBB corporates.

Well, XRB ain't corporates. It's a federal-government-backed guarantee (90% of holdings) that investors get their money back, plus inflation, plus a small -- and now growing -- premium.

In a roiling market, isn't it exactly what you'd want???
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Re: Real Return Bonds

Post by longinvest »

According to Selected Bond Yields - Bank of Canada, the real yield on long-term RRBs jumped from -0.33% on March 9, to +0.39% on March 13. I guess that it jumped even higher today.

Why are investors surprised to see that government bonds are subject to the Law of supply and demand? That's the inherent nature of marketable securities!
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ghariton
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Re: Real Return Bonds

Post by ghariton »

The other problem is liquidity. RRBs are less liquid than nominal government bonds, and the perception is even worse than the reality. Prices of RRBs dropped, and yields increased, during the 2008-2009 unpleasantness. Given the opportunity, I accelerated my purchases and soon reached my long-term allocation to RRBs.

See also Warren Buffet on hamburgers going on sale.

George
The juice is worth the squeeze
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