Despite US Treasury department manipulation of the yield curve last week and another Fed pause, yields still average above five in the aggregate

 We saw a much bigger surge into bonds in March, but yields persisted.

With inflation, employment, and nominal GDP all still strong, Treasury tricks are unlikely to unravel this.

Cash such as VMFXX at 4.21% ytd and total stock market such as VTSAX at 13.92% ytd continue to trounce bonds ytd. VBTLX is still down 0.39% ytd. AGG is down 3.46% ytd.

 

US Treasury yields pushed to new cycle highs last week despite another Fed interest rate pause

 Cash was about the only thing which did better week over week on Friday. Treasuries and bonds generally took a beating, as did stocks.

The UST yield curve aggregate closed up a net 1.27% week over week on 9/22, to an average of 5.0707692, the highest Friday close yet for this cycle.

Yields in the aggregate made a new high for this cycle on Thursday, for an average of 5.0915384. 

Here's the year-to-date performance for key categories using some commonly used Vanguard funds:

Treasury Market VFISX 0.66% VFITX -0.70% VUSTX -5.57%;

Investment Grade Market VFSTX 2.08% VFICX 1.32% VWESX -0.83%; 

Total Bond Market VBTLX -0.03% (+0.44% previous week);

Cash VMFXX 3.58% (3.48% previous week);

Total Stock Market VTSAX 12.95% (16.45% previous week).

 

 

Let's check in on the US Treasury yield curve and year to date performance of selected Vanguard funds

The UST yield curve aggregate closed up a net 0.68% week over week on 9/15, to an average of 5.006923, the first Friday close this cycle in the 5s.

 

As expected, fixed income isn't doing well in this rising-rate environment. Stocks have done surprisingly well this year, and even cash has beaten bonds.

 

YTD performance:

 

Treasury VFISX 0.68% VFITX -0.26% VUSTX -4.12%;

Investment Grade VFSTX 2.21% VFICX 1.73% VWESX 0.00%; 

Total Bond VBTLX 0.44%; Cash VMFXX 3.48%; Total Stock VTSAX 16.45%.

 

Other popular vehicles: 

 

$SPX 16.37%

$AGG -2.12%

$TLT -8.38%. 

 

It's been a terrible year so far for investors in US Treasury securities because of the rising rate environment, but great for stocks

UST yields rose a net 1.31% in the aggregate week over week on 7/28.

DFF rises to 5.33% after the latest FOMC rate hike.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year to date Treasury, Total Bond, Cash, and Total Stock performance using popular Vanguard funds:

VFISX +0.75% VFITX 0.90% VUSTX 1.58% VBTLX 2.05% VMFXX 2.75% lol VTSAX 19.99%!

Stocks have been the place to be, and cash has beaten even the total bond market.

Meanwhile stocks are obscenely overvalued at 169 using the latest report of GDP out Thursday:

 

The traditional 60/40 portfolio is now down only 13.76% in 2022 through November, not adjusted for inflation north of 6%

Total stock market index, VTSAX:  -14.51% through November

Total bond market index, VBTLX:  -12.64% through November

Through Oct 14 the traditional 60/40 401k portfolio is down a net 21% in 2022, not counting inflation

 Bonds are supposed to perform well as the safe haven asset when stocks fall, reducing the net impact to the portfolio when equities decline.

But not this year!

Bonds have actually crashed on the long end, down even more than stocks, as stocks entered a bear market.

The bond crash is a market statement rebuking the spending those bonds have represented: Not enough return for the risk.

So far the spendthrift Congress remains tone-deaf, leaving it to the Fed to raise interest rates . . . ever so feebly.

No one in his right mind believes raising interest rates 300 basis points is going to have much impact on inflation raging at 800 basis points.

The traditional 60/40 portfolio is down 20.77% ytd

 VTSAX is down 24.89% through 9/30.

VBTLX is down 14.59% through 9/30.

And don't forget to subtract all-items inflation of 6.14% from Nov 2021 through Aug 2022!

Headlines are popping up advocating safe havens in cash and short-duration US Treasury securities, but you'll still lose in those relative to inflation, just not as much.

What a great job the Democrats have done this year! Destroying the bond market wasn't on my bingo card for 2022, even though the high and rising prices for bonds has been a deal-breaker for me for a long time.

The Democrats' green war on energy has consequences.

Is real war next?

The Great Long Term Investment Grade Bond Debacle of 2022

Safe havens aren't supposed to do this.

Long term return for VWESX since inception in 1973 near the end of 2018 reached north of 8%.

In 2022 ytd return is -27.28%.

The whole spectrum of bonds as represented by VBTLX is down ytd 14.79%.

Traditional investors with a 60/40 portfolio are down over 20% through yesterday because stocks and bonds both are falling.

Cash is king again.