"F" Fund Basics

[Afishegg]

...

 

[Afishegg]

You might want to check my position on the tracker before you listen to anything I have to say.

:nuts:

 

[JTH]

We still have a ways to go before we can put a nail in the F-Fund coffin. Volume on the sell-off leads me to believe it was just your standard "profit taking."

View attachment 9907

 

[alevin]

Re: F Fund for a deflation trade.

Okay, those looking to play with F as a longer term hold towards a 'deflating' economy, be weary. Reason being, the average bond duration for Aggregate Bond Index is only around 6.2 years. The low end durations (<10 years) have been manipulated by the Fed's artificially low interest rate and really don't have any upside left. (Basically, the Fed buys the short end to keep rates low.) The high end bonds (30 year treasury) have been flying off the handle because that is where the buying interest has been amongst institutions. Usually a 30 year is yielding at least high 4% (or 5%), whereas today it yields 3.69!

We shall see whether the rejection on Friday was a reversal of the deflation trade or 'profit taking' at resistance.

I'm personally out of treasuries for the deflation trade as I closed out positions last Wednesday. I do, however, have some exposure as part of a diversified LT indexed portfolio.

Bullitt, thanks for speaking to the average duration in AGG. I hadn't seen that before. I understand the associated duration risk better than I ever did before. So can you speak to the fact that there were 12-18% gains in F in the mid80s? What duration would that bond portfolio have been? does AGG average duration ever change? did the Fed drive down the yield in the 80s after Volker spiked yields to bring down inflation in the late 70s?

 

[JTH]

“When one asset becomes pricey, investors start looking for alternatives,”

Mr. Lapointe said the average historical ratio for dividend yields is just 42.5% of the 10-year bond. And since 1973, there have only been 50 occasions when the ratio was more than one standard deviation above the historical average of 42%.

 

[Monty]

http://us.ishares.com/product_info/fund/overview/AGG.htm

has lots of things you may want to know about AGG.

 

[crws]

http://us.ishares.com/product_info/fund/overview/AGG.htm

has lots of things you may want to know about AGG.

thanks-

Maturity as of 8/26/2010
View all holdings
0-1 Years 35.60%
1-5 Years 33.67%
5-10 Years 17.37%
10-15 Years 1.85%
15-20 Years 1.00%
20-25 Years 2.48%
25 Years and Over 8.63%
Average 5.83 years