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Your bond(s) performance since 2008

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Deal Addict
Dec 3, 2014
1572 posts
102 upvotes
New Westminster, BC

Your bond(s) performance since 2008

How have your bonds performed since 2008 (i.e. the crash and the interest rate drop to historic lows)?
The reason I ask is that if you got into bonds at that time then you are laughing all the way to the bank.
The Federal Reserve came out today again and the question everyone was asking was WTF, Janet Yellen when are you going to raise interest rates, bitch?!
Now we all know the Federal Reserve is not going to raise rates probably not in my lifetime. This has been going on for 7-8 years now. Japan has been at historic lows since the mid 80's.
14 replies
Deal Addict
Jan 7, 2014
2722 posts
549 upvotes
Manitoba
So are you just one year or one and half kind of towards your death?
Deal Addict
Dec 3, 2014
1572 posts
102 upvotes
New Westminster, BC
If you can see my future, then can you at least tell me when interest rates will rise?
Deal Addict
Mar 8, 2013
2950 posts
1611 upvotes
I bought 2 strip bonds around that time, but I check the rate of return only once a year in the maturity month:
1. In June 2008, I bought Newfoundland $25,000 maturing in Oct 2023 for $11,829. In October 2014, it was worth $19,101, about 7% compounded annually over that period.
2. In March 2009, I bought Ontario $25,000 maturing in December 2024 for $10,926. In December 2014, it was worth $18,450, about 8% compounded.

Yesterday, they were worth $20,708.95 & $20,109.65
Deal Addict
Dec 3, 2014
1572 posts
102 upvotes
New Westminster, BC
akaManny wrote: I bought 2 strip bonds around that time, but I check the rate of return only once a year in the maturity month:
1. In June 2008, I bought Newfoundland $25,000 maturing in Oct 2023 for $11,829. In October 2014, it was worth $19,101, about 7% compounded annually over that period.
2. In March 2009, I bought Ontario $25,000 maturing in December 2024 for $10,926. In December 2014, it was worth $18,450, about 8% compounded.

Yesterday, they were worth $20,708.95 & $20,109.65
That's not bad at all. In this environment, anything 5% or above for bonds is pretty damn good and the fact that they are government bonds makes it even better.
Sr. Member
Nov 5, 2013
624 posts
122 upvotes
gelato69 wrote: How have your bonds performed since 2008 (i.e. the crash and the interest rate drop to historic lows)?
The reason I ask is that if you got into bonds at that time then you are laughing all the way to the bank.
The Federal Reserve came out today again and the question everyone was asking was WTF, Janet Yellen when are you going to raise interest rates, bitch?!
Now we all know the Federal Reserve is not going to raise rates probably not in my lifetime
. This has been going on for 7-8 years now. Japan has been at historic lows since the mid 80's.
I read the wall street journal a few minutes ago, and didnt see that Janet Yellen mentioned anything in front of the House not to raise the interest rate. But, she did mention about two months ago not to raise the interest rate in the next couple quarters in 2015, and she added that a couple in the dictionary means 2.

If you think that the bond holders are laughing all the way to the banks, you should see the face of those stock holders.
Deal Addict
Oct 29, 2010
4475 posts
811 upvotes
The funny thing, some countries are heading towards negative interest rates, it will cost you interest to park your money.
Sr. Member
May 14, 2008
570 posts
179 upvotes
Montréal
flafson wrote: The funny thing, some countries are heading towards negative interest rates, it will cost you interest to park your money.
Seriously? and people do it? well...
Deal Addict
Oct 29, 2010
4475 posts
811 upvotes
destinet wrote: Seriously? and people do it? well...
I didn't see anywhere where it happened already but there are a few countries that recently lowered their prime rate to 0.1%
Deal Addict
Dec 11, 2007
1958 posts
582 upvotes
Markham
overnight rates may not be negative, but German bunds have been going negative for some time
just google german bund negative yield and you can see

recently 5 year bund has gone negative
http://www.wsj.com/articles/germany-sel ... 1424871074

last year the 2 year went negative
http://www.bloomberg.com/news/articles/ ... below-zero


i guess people's logic is that its better to loan Germany $100 and get back $99 than to loan some other peripheral Eurozone country $100 and possibly get back $25 or $50
Deal Guru
User avatar
Sep 8, 2007
10978 posts
14472 upvotes
Way Out of GTA
flafson wrote: I didn't see anywhere where it happened already but there are a few countries that recently lowered their prime rate to 0.1%
Denmark. Lowered it to negative and then lowered it to more negative. The whole global financial system is a farce. How does the tax code even treat interest expense on a long position in cash! You can write off interest expense on borrowing to produce income...but cash should be producing income not an expense. Most tax codes can't even deal with this bizarro world nonsense and will have to be rewritten.

As Japan has showed us and led the way, then followed by the US, and now everyone else... This is open wealth confiscation from savers and the public to reward banks and bond and stock market participants. This is happening under both left and right governments...so it's not like there is any party that stands against this. Will we ever see 5% yield on US/Can/Euro 10 year treasuries ever again? Capital misallocations are happening everywhere. Japan has moved from outright buying their own bonds into outright buying their own large cap stocks. This is with the publics money!

http://www.bloombergview.com/quicktake/ ... rest-rates
Newbie
Nov 7, 2016
53 posts
3 upvotes
gelato69 wrote: That's not bad at all. In this environment, anything 5% or above for bonds is pretty damn good and the fact that they are government bonds makes it even better.
i'm curious about the rate of return
can someone break it down for me?
like i read reader AskManny bought Ontario $25,000 maturing in 2014 for $10,926 - what does that mean?
and in 2014 of dec, it was worth $18,450, about 8% compounded - what does this exactly mean?

ive been trying to do the calculations
ive just being coming up confused or short
or just not understanding the numbers
i really need a good source on how to get started on this
anyone?

for example, in a different setting, a reader posted these two strip bonds, is the yield gauranteed until the bond is held to maturity? just simply not paid out annually? but still compounded inside the bond? does anyone have experience with this kind of return..?

1) CUSIP: 077906DC6
15,000 BCE COUPON STRIP
MATURITY: 5/15/2030
PRICE: 50.95
YIELD: 4.43
Deal Addict
Mar 8, 2013
2950 posts
1611 upvotes
nutcrackergirl wrote: ...
for example, in a different setting, a reader posted these two strip bonds, is the yield gauranteed until the bond is held to maturity? just simply not paid out annually? but still compounded inside the bond? does anyone have experience with this kind of return..?
A strip bond is 'like' a compounding GIC, in that it doesn't pay any interest until maturity, but the only guarantee is the maturity value (subject to the issuer's ability to pay). In the example of the BCE 5/15/2030, you would be guaranteed 4.43% compounded annually if you bought at the time of the quote. Then, from the time of purchase, the market value and the yield to maturity will change regularly. That depends on prevailing interest rates and credit risk. So a strip bond of a provincial government will cost you more and the yield to maturity will be less than for BCE. A strip bond of the federal government will cost you even more and yield even less because there is definitely less risk. If investors perceive that there is an increasing chance that BCE will not be able to pay in 2030, the market value of the strip bond will drop, independent of interest rates. You will be able to sell your strip bond on the open market, but you will get less for it because of this perception of risk. That's why I never buy individual corporate strip bonds; for me, it is not worth the risk.

The mathematics of how the market value is determined is beyond me. But the mathematics of how the yield to maturity is calculated from the market value is straight forward.
Newbie
Nov 7, 2016
53 posts
3 upvotes
akaManny wrote:
The mathematics of how the market value is determined is beyond me. But the mathematics of how the yield to maturity is calculated from the market value is straight forward.
i appreciate the advice

recent strip bond posted on questrade was
 74,000 QUEBEC CITY
coupon 1.55
maturity 6/10/2017
price 100.49
yield 0.61

im wondering if i were interested how would i go about calculating the the cost to purchase it... with the face value ..? of 74,000 in mind ... ? i currently have an account with questrade..

ive been going in circles trying find out online but i guess im asking how do you or anyone else with experience budget for this purchase?
Deal Addict
User avatar
Aug 4, 2014
3963 posts
4723 upvotes
Toronto, ON
nutcrackergirl wrote: ive been going in circles trying find out online but i guess im asking how do you or anyone else with experience budget for this purchase?
Face value * price / 100. Note that you don't need to buy the entire 74,000 lot - the minimum purchase is 5K of face value (for both strips and regular bonds) I purchased both at Questrade before - but only corporate (as the yields on others are tiny)

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