# Poll: Interest rates and your bond strategy **URL:** \ **Category:** Investing / Portfolios\ **Created:** [March 23, 2022, 6:45pm UTC](https://forum.mustachianpost.com/t/poll-interest-rates-and-your-bond-strategy/8189 "2022-03-23T18:45:30Z")\ **Posts on this page:** 19\ **Page:** 1
**Author:** ![ProvidentRetriever](https://forum.mustachianpost.com/user_avatar/forum.mustachianpost.com/providentretriever/32/3655_2.png) [@ProvidentRetriever](https://forum.mustachianpost.com/u/ProvidentRetriever)\ **Post date:** [March 23, 2022, 6:45pm UTC](https://forum.mustachianpost.com/t/poll-interest-rates-and-your-bond-strategy/8189/1 "2022-03-23T18:45:30Z")
Has the recent rise in interest rates affected your allocation? How? _Poll ([view on site](https://forum.mustachianpost.com/t/poll-interest-rates-and-your-bond-strategy/8189/1))_ ---
**Author:** ![Dr.PI](https://forum.mustachianpost.com/user_avatar/forum.mustachianpost.com/dr.pi/32/5299_2.png) [@Dr.PI](https://forum.mustachianpost.com/u/Dr.PI)\ **Post date:** [January 28, 2023, 7:25am UTC](https://forum.mustachianpost.com/t/poll-interest-rates-and-your-bond-strategy/8189/2 "2023-01-28T07:25:37Z")
Time to bump it up! 一二三四五六七八九十 ---
**Author:** ![Abs\_max](https://forum.mustachianpost.com/user_avatar/forum.mustachianpost.com/abs_max/32/12379_2.png) [@Abs\_max](https://forum.mustachianpost.com/u/Abs_max)\ **Post date:** [July 26, 2024, 10:58am UTC](https://forum.mustachianpost.com/t/poll-interest-rates-and-your-bond-strategy/8189/3 "2024-07-26T10:58:07Z")
Perhaps my question will fit here. For discussion purposes , let’s ignore the second pillar because it’s kind of out of control. If I want to look at my **Taxable account + 3a** portfolio, and if I want to have asset class diversification, how should I view the role of bonds based on current situation. Few things I understood so far is -: - better to hedge the bond exposure for currency - Expected return from currency hedged govt bond ETF should be similar to local govt bond ETF. If I look at 5-10 year CH government bond yields at this moment, they seem to be less than 1%. This brings them closer to Zero or Negative real rates category (accounting for inflation). This means even if I buy global govt bond ETF, it would still result in \<1% effective yield. With such low yields which don’t even cover inflation, can a sizeable allocation to bonds be justified if one is NOT near retirement? I am a bit confused why CH is keeping interest rates below inflation. This makes bonds not very interesting. But then CH bonds market is quite big. So this should also mean something. What is common view on bonds amongst people on this forum? 1. Do you hold any bond ETFs in your portfolio excluding 2a? 2. If yes, do you have any return expectations or it’s just a way to protect the capital but not to generate returns Edit -: sharing an [article](https://am.pictet/en/switzerland/articles/swiss-bonds/why-swiss-bonds) from Pictet throwing some light into topic of CHF bonds. They suggest that actual total return is a bit higher than Yield to maturity ---
**Author:** ![PhilMongoose](https://forum.mustachianpost.com/user_avatar/forum.mustachianpost.com/philmongoose/32/12331_2.png) [@PhilMongoose](https://forum.mustachianpost.com/u/PhilMongoose)\ **Post date:** [July 26, 2024, 3:13pm UTC](https://forum.mustachianpost.com/t/poll-interest-rates-and-your-bond-strategy/8189/5 "2024-07-26T15:13:05Z")
Things look so toppy, I’m actually thinking of moving some short term bond ETFs into cash/actual T-bills and manually rolling them to ensure liquidity in case the SHTF and there are liquidity issues with bond ETFs. I’m currently 70/30 stock bonds with target of 60/40. ---
**Author:** ![Abs\_max](https://forum.mustachianpost.com/user_avatar/forum.mustachianpost.com/abs_max/32/12379_2.png) [@Abs\_max](https://forum.mustachianpost.com/u/Abs_max)\ **Post date:** [July 26, 2024, 3:25pm UTC](https://forum.mustachianpost.com/t/poll-interest-rates-and-your-bond-strategy/8189/6 "2024-07-26T15:25:47Z")
> [@oslasho](#): > > if i got it right, you’re _not_ close to retirement (part of risk capacity). you still want to diversify, so the reason could be based on another short to mid term financial need/goal and/or due to your risk tolerance, right? Yeah I am not close to retirement. But I just feel having 100% in stocks will cause anxiety for me as portfolio grows. It’s one thing when portfolio is small but when portfolio grows, 20-30% swings can be nerve racking. So I was thinking of reducing volatility. But then it seems like there isn’t much return on CH Bonds due to very strong underlying currency. Thought to ask how others navigate this challenge ---
**Author:** ![Abs\_max](https://forum.mustachianpost.com/user_avatar/forum.mustachianpost.com/abs_max/32/12379_2.png) [@Abs\_max](https://forum.mustachianpost.com/u/Abs_max)\ **Post date:** [July 26, 2024, 3:39pm UTC](https://forum.mustachianpost.com/t/poll-interest-rates-and-your-bond-strategy/8189/7 "2024-07-26T15:39:51Z")
Are you referring to US T-Bills? But then they come with currency devaluation as well. Right? Or you meant CHF denominated ---
**Author:** ![PhilMongoose](https://forum.mustachianpost.com/user_avatar/forum.mustachianpost.com/philmongoose/32/12331_2.png) [@PhilMongoose](https://forum.mustachianpost.com/u/PhilMongoose)\ **Post date:** [July 26, 2024, 3:47pm UTC](https://forum.mustachianpost.com/t/poll-interest-rates-and-your-bond-strategy/8189/8 "2024-07-26T15:47:25Z")
Yes, US T-Bills, so there is some FX risk. ---
**Author:** ![ma0](https://forum.mustachianpost.com/user_avatar/forum.mustachianpost.com/ma0/32/3259_2.png) [@ma0](https://forum.mustachianpost.com/u/ma0)\ **Post date:** [July 26, 2024, 3:52pm UTC](https://forum.mustachianpost.com/t/poll-interest-rates-and-your-bond-strategy/8189/9 "2024-07-26T15:52:15Z")
BOXX ETF makes ~5% p.a. while CHF/USD is at -1,4%. Can it really go lower than 5%? ---
**Author:** ![Abs\_max](https://forum.mustachianpost.com/user_avatar/forum.mustachianpost.com/abs_max/32/12379_2.png) [@Abs\_max](https://forum.mustachianpost.com/u/Abs_max)\ **Post date:** [July 26, 2024, 4:04pm UTC](https://forum.mustachianpost.com/t/poll-interest-rates-and-your-bond-strategy/8189/10 "2024-07-26T16:04:45Z")
I don’t know how currency devaluation work exactly. But I think variables at play are - interest rates - inflation - Fiscal deficit ---
**Author:** ![Wolverine](https://forum.mustachianpost.com/user_avatar/forum.mustachianpost.com/wolverine/32/3315_2.png) [@Wolverine](https://forum.mustachianpost.com/u/Wolverine)\ **Post date:** [July 26, 2024, 4:27pm UTC](https://forum.mustachianpost.com/t/poll-interest-rates-and-your-bond-strategy/8189/12 "2024-07-26T16:27:27Z")
While the market seems not to price it in, the US will have a new debt ceiling discussion in January next year. They’re going closer to messing it out each time, T-Bills could present some risk if any one of the chambers or presidency is not of the same party. Fixed income is a part where I feel retail Swiss investors have an advantage over institutions. Institutions are too big for esisuisse insured medium term notes or savings accounts, that yield more than similar duration bonds. Rebalancing is tricky but if the goal is to have stable assets, I’d consider those. ---
**Author:** ![Barto](https://forum.mustachianpost.com/letter_avatar_proxy/v4/letter/b/e9c0ed/32.png) [@Barto](https://forum.mustachianpost.com/u/Barto)\ **Post date:** [July 29, 2024, 9:20am UTC](https://forum.mustachianpost.com/t/poll-interest-rates-and-your-bond-strategy/8189/13 "2024-07-29T09:20:03Z")
> [@Abs\_max](#): > > With such low yields which don’t even cover inflation, can a sizeable allocation to bonds be justified if one is NOT near retirement? I hold 0 bonds outside my pension. I have debts so it does not make sense to earn 1.5% interest income whilst paying 2.5% Interest rates are incredibly low, these are not normal times for Swiss investors. SNB intent is to keep inflation at 2% target. They provide incentive for borrowing and investment and for the population to spend and discourage hoarding of cash in bonds. I am close to retirement so should otherwise own bonds but my personal opinion is that the opportunity cost is too high and the classical approach is broken for the meantime My alternative approach to manage risk is to keep SWR in retirement below \<3% , I also own some overseas investment property acquired \>10 years ago generating cash flow. ---
**Author:** ![Abs\_max](https://forum.mustachianpost.com/user_avatar/forum.mustachianpost.com/abs_max/32/12379_2.png) [@Abs\_max](https://forum.mustachianpost.com/u/Abs_max)\ **Post date:** [July 29, 2024, 1:32pm UTC](https://forum.mustachianpost.com/t/poll-interest-rates-and-your-bond-strategy/8189/14 "2024-07-29T13:32:38Z")
So basically your non-pension portfolio is following _Assets_ - stocks - Real estate _Liabilities_ - Debt Even though I understand the comment about opportunity cost, I feel that this only plays out as long as bull run continues. I am thinking more of a scenario where a bear market triggers and all assets are in stocks, that can result in severe drawdown. If I get it right, your approach would be to reduce the withdrawals to compensate for it but keep high stocks allocation. Right? By the way, I don’t know if SNB is trying to discourage bonds purchases or they are keeping interest rates low to avoid a currency appreciation. ---
**Author:** ![Barto](https://forum.mustachianpost.com/letter_avatar_proxy/v4/letter/b/e9c0ed/32.png) [@Barto](https://forum.mustachianpost.com/u/Barto)\ **Post date:** [July 29, 2024, 4:00pm UTC](https://forum.mustachianpost.com/t/poll-interest-rates-and-your-bond-strategy/8189/16 "2024-07-29T16:00:58Z")
> [@Abs\_max](#): > > I understand the comment about opportunity cost, I feel that this only plays out as long as bull run continues. If you have a long enough investment horizon then I have high confidence stocks will earn higher returns if you can sit tight through the inevitable crashes along the way. If you buy a CHF bond the “benefit” is you take some money off the casino table but you miss out on probable large long term gains of the stock market, and earn 0 or less in real terms after tax. If bonds had higher rates I would diversify between 2 strongly performing asset classes and periodically rebalance, but I do not see bonds as strongly performing assets at current prices and interest rates. > [@Abs\_max](#): > > If I get it right, your approach would be to reduce the withdrawals to compensate for it but keep high stocks allocation Also: Owning rental properties with cashflow Keeping my stock portfolio boring (focus on blue chips, avoid doing my own stock picking) Being ready to reduce optional withdrawals > [@Abs\_max](#): > > don’t know if SNB is trying to discourage bonds purchases or they are keeping interest rates low to avoid a currency appreciation. Both are linked. Lower rates means fewer buyers for CHF bonds, which means less demand for CHF ---
**Author:** ![Barto](https://forum.mustachianpost.com/letter_avatar_proxy/v4/letter/b/e9c0ed/32.png) [@Barto](https://forum.mustachianpost.com/u/Barto)\ **Post date:** [July 30, 2024, 8:36am UTC](https://forum.mustachianpost.com/t/poll-interest-rates-and-your-bond-strategy/8189/18 "2024-07-30T08:36:51Z")
> [@oslasho](#): > > a) what about other asset classes, which ones are “historically attractive”? > > b) isn’t “what if… [i’m wrong] … [xyz happens]?” the essence of risk management and, thus, diversification? a) Currently I have 25% of my NW in investment property The yield is not amazing. Not many assets have attractive prices right now b) Correct but I think the other side of the coin that too much diversification can weaken returns > [@oslasho](#): > > > [@Barto](#): > > > > Being ready to reduce optional withdrawals > > isn’t that a form of opportunity cost, too? I agree, of course there are different options at retirement An alternative option might be that I go with a less volatile portfolio at retirement and a 3.5 or 4% withdrawal rate. The trade-off is that the potential for my wealth to keep growing in the long term is reduced so I do not choose this option ---
**Author:** ![Dr.PI](https://forum.mustachianpost.com/user_avatar/forum.mustachianpost.com/dr.pi/32/5299_2.png) [@Dr.PI](https://forum.mustachianpost.com/u/Dr.PI)\ **Post date:** [July 31, 2024, 6:14am UTC](https://forum.mustachianpost.com/t/poll-interest-rates-and-your-bond-strategy/8189/19 "2024-07-31T06:14:47Z")
> [@Barto](#): > > too much diversification can weaken returns Diversification is an insurance. You pay a premium to have an insurance, you don’t earn with it. Diversifying away from Nvidia last few years would drastically diminish your investment returns 🤷. ---
**Author:** ![Barto](https://forum.mustachianpost.com/letter_avatar_proxy/v4/letter/b/e9c0ed/32.png) [@Barto](https://forum.mustachianpost.com/u/Barto)\ **Post date:** [July 31, 2024, 9:23am UTC](https://forum.mustachianpost.com/t/poll-interest-rates-and-your-bond-strategy/8189/20 "2024-07-31T09:23:58Z")
> [@Dr.PI](#): > > Diversification is an insurance I do not argue against diversification but my own view is that for my personal situation owning CHF bonds at today’s rates is not a good option. It implies locking in negative real returns after taxes. Historical performance of 60-40 portfolios seems not applicable as a predictor in today’s dynamics for a swiss investor. When rates increase I’ll revise my allocation > [@Dr.PI](#): > > Diversifying away from Nvidia last few years would drastically diminish your investment returns I do not advocate investing in single stocks or speculative tech stocks. ---
**Author:** ![Abs\_max](https://forum.mustachianpost.com/user_avatar/forum.mustachianpost.com/abs_max/32/12379_2.png) [@Abs\_max](https://forum.mustachianpost.com/u/Abs_max)\ **Post date:** [July 31, 2024, 8:04pm UTC](https://forum.mustachianpost.com/t/poll-interest-rates-and-your-bond-strategy/8189/22 "2024-07-31T20:04:10Z")
> [@oslasho](#): > > historically low yields? true - but do we know for sure they cannot go even lower (again)? no, otherwise we’d just go short and take away the free money. so, it’s still _possible_ that e.g. a 20yr-bond will make you 20% or more within a year. or some cash / short-term fixed income with that zero to negative real return could still generate more than stocks over the next few years (at that time we might be happy to rebalance some). I think that’s possible but that would mean the 20y yields would need to go to negative. Currently they are at 0.45%. For a 20% change on 20 yr bond, we would need yields to go to negative. Even though it is possible, I think chances of negative yields are low. It feels like capital appreciation chances for CH bonds are limited at this moment. Yield and reinvestment of coupons should give some returns hopefully. Let’s see how it goes. Going to 100% stocks is not for the faint hearted 🙂 the way the whole stock market is hinging on Mega7 , it’s kind of scary ---
**Author:** ![Abs\_max](https://forum.mustachianpost.com/user_avatar/forum.mustachianpost.com/abs_max/32/12379_2.png) [@Abs\_max](https://forum.mustachianpost.com/u/Abs_max)\ **Post date:** [July 31, 2024, 8:16pm UTC](https://forum.mustachianpost.com/t/poll-interest-rates-and-your-bond-strategy/8189/24 "2024-07-31T20:16:09Z")
Negative yields won’t be good ☹ it would bring TINA (there is no alternative) back into play for stocks ---
**Author:** ![Barto](https://forum.mustachianpost.com/letter_avatar_proxy/v4/letter/b/e9c0ed/32.png) [@Barto](https://forum.mustachianpost.com/u/Barto)\ **Post date:** [August 1, 2024, 10:35am UTC](https://forum.mustachianpost.com/t/poll-interest-rates-and-your-bond-strategy/8189/26 "2024-08-01T10:35:41Z")
> [@oslasho](#): > > historically low yields? true - but do we know for sure they cannot go even lower (again)? no, otherwise **we’d just go short and take away the free money**. For example buy a property with a mortgage or take a margin loan… 🤷