VUSTX fell to $7.37 yesterday, October 19, 2023.
Until the bond debacle of 2022, the lowest price ever was set way back in 1987, also on October 19, aka Black Monday, when the S&P 500 crashed 20.47% in its worst single day ever.
2022's new all time low for VUSTX at 8.16 had occurred on October 24, missing the anniversary of the old all time low by just three days. Also a very odd coincidence.
The debacle has only continued in 2023, and VUSTX prices haven't seen $8 since September 22nd.
ZIRP since the Great Recession is ultimately to blame for the current mess in long term Treasury securities. The clamor it created for yield drove bond investors long, culminating in the highest nominal prices ever paid for long term UST in March 2020, and the lowest yields. 30Y UST yield crashed to 0.99% on March 9, 2020, 20Y to 0.87%. Yields across the board in 2023 for 2Y to 30Y have set records for this cycle in October. Yesterday 20Y demanded 5.30%, 30Y 5.11%.
No one wants that 2020 and prior junk now, so wherever it sits it's causing collateral problems, at banks, insurance companies, pension funds, et cetera. And on the Fed's balance sheet: As of October 18th the Fed has $1.503922 trillion of UST maturing in more than 10 years on its balance sheet. It basically has to keep it until it matures, and it pays it very little to return to the Treasury as it does.
Are prices done falling?
Confident pretenders said so a year ago this month, and now here we are with $TLT investors down another 12.22% since then.
Given the obscene overvaluation of stocks, and the demand for higher yields by bond investors, cash still seems the safest place to be. VMRXX, Vanguard Cash Reserves Federal Money Market Fund Admiral Shares, has returned 4.00% ytd. You continue to lose to inflation, however.
Nothing is ever perfect.
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| 1987 high and low |
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| 2022 high and low to the left, all time high and low to the right |
