Is this a time to buy US treasuries? US treasuries have way higher rates than Swiss ones (short-term 3.6%, long term 3.4%). Since inflation’s much lower in Switzerland, and USD and CHF haven’t seen significant devaluation in relation to each other in the past 5 years, US treasuries would be a nice investment for Swiss residents, wouldn’t they? Real (inflation-adjusted) returns for US treasuries are higher here than in the US.
Do I get this right: the ETF you mentioned will rotate individual bonds as long as the ETF exists, while buying an individual Kassenobligation will have one single yield to maturity? So basically, buying a short term kassenobligation for money I need, say, in a year, would be a better investment than leaving it in cash in my bank account?
I totally agree with higher returns on stocks in the long run. Bonds will likely not become an issue for me until short before retirement.
I explained in a former post that 100% in stocks is not for everybody and that bonds, for most people, are a part of their long-term strategic allocation. This is to avoid panic-selling in a downturn.
The question is then: what bonds and does it make sense to invest in foreign currency denominated bonds. Durations should generally be kept short to medium, and long durations avoided. Some people stick to only CHF especially if they have a low strategic bond percentage. But foreign currencies can make sense to diversify the issuer base and make the risk even lower. Again, diversification is the main
motivation to do that and not higher interests, because in the long term real interest rates are the same across all currencies for the same notation.
Generally though bonds issued in foreign currency should be hedged against currency fluctuations because the goal of bonds in a portfolio is to reduce risk.
Thanks, I totally agree. So I’d be basically using bonds for diversification to stocks after retirement, and in a descending 10year glide path to a 100% stock allocation (only to reduce sequence of return risk at the beginning of retirement, and secure withdrawal rate). In that regard, I believe only long term treasuries (LTT) make sense, since historically, they’ve been least correlated to the stock market.
I’d love to use a mix of Swiss LTT and foreign, CHF-hedged LTT. Are there any cheap ETFs that fit these requirements?
But you’d agree that holding CHF-hedged international treasuries (e.g. in addition to Swiss treasuries) could make sense from a diversification point of view? I think @ProvidentRetriever pointed that out.
The idea being: I don’t wish to put all my faith in the Swiss government / succumb to home bias.
By the way it is possible to buy individual US Treasury bonds at IB. Bonds with the same time to maturity have typically the same yield to maturity, but if you pick some with a low coupon, you save on Swiss taxes.
Nominal coupon yields were never negative for Swiss gov bonds either. Yield-to-maturity was negative but that’s market driven and this could theoretically also happen with US treasuries, as far as I can tell.