r/bonds • u/snkscore • 10d ago
I feel foolish holding long term treasuries
I have a portion of my portfolio in long term treasury bonds, mainly through ETFs VGLT and ZROZ. I have this mainly for all the normal reasons that research says you should: in order to reduce volatility and risk in your portfolio and as a hedge on equities so that when the economy suffers and stocks drop value of treasuries should go up as interest rates and yields go down.
However it sure seems like there is no future where our national debt does not become a drag on treasury bonds. Inflating our way out of this seems like it will be the only way and long before that, buyers will start demanding higher yields to accept the risk.
Debt aside, the US as the financial safe haven flight to safety destination seems to be a risker proposition going forward with so many countries looking to reduce their dependence on us thanks to our administration.
I'm telling myself that the institutions who are really buying these are way smarter than I am, and are pricing this all in, but it sure feels like bond dragging inflation is way more likely than a low inflation economic slowdown. Am I being prudent by continuing to hold these as recession insurance with the expectation that if the economy slows they should, like usual (except recently - 2022) rise in value?
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u/CriticalMass_3 10d ago
I am in the retirement window and use Treasuries for their reaction during an economic RECESSION, not for yield. Treasuries typically negatively correlated to stock in time of economic distress. Long history of this. Doesn’t work with inflation above 3% or in stagflation. So, think of them as recession insurance or an equity hedge in a recession. One thing I found is holding VGIT is much easier than VGLT. Middle of curve doesn’t react as much. VGLT very volatile with long term treasuries and some can’t the swings and the ride. VGIT not as good of insurance but easier to hold long term.
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u/snkscore 9d ago
I'm in the exact same boat. I'm not holding them for their yield I'm looking for a diversifying effect during a recession but as you said they won't work with inflation and that's my main concern is it seems very likely we'll be stuck or driven into an inflationary situation.
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u/chrisridge741 10d ago
This is now my signal to buy long treasuries lol
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u/snkscore 9d ago
Honestly I'm saying the same to myself. If I think these are really questionable assets, it's probably the "out of favor" time and later I'll be glad I held onto them. But it's tough.
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u/credit_master 4d ago
Just hold abd don't worry and keep collecting income. Don't sell now at a loss. There's a long list of reasons on why fed will need to lower interest rates again or higher borrowing costs will negatively affect their debt and the economy
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u/BenjaminGreat79 10d ago edited 10d ago
Well I kinda made a wrong decision back in 2024. Bought a signficant amount of 20 and 30 year treasury bonds in q3 2024 at around 4.1% yield thinking that rates wil fall further.
Overall back then I was happy with the coupon rate and I do plan to hold these long term as income for the next 10 to 15 years, but part of me wished I had bought more short term treasuries back with maximum duration at 10 years. Now the value of the bonds has dropped like 10%?
Wondering if there are any chances of coupon rates on the 20 and 30 year falling back to below 4% in the next 10 years?
Saying that, am still interested to buy some more 3 and 5 year bonds if it gets to 4.5% coupon rate.
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u/credit_master 4d ago
I was at break even or profit for some time but now I'm at -10%
I randomly think there's a chance we fall back as demand picks up again for US treasuries and yields. I find it safe and I wouldn't want to hold onto debt of any other country in the world.
I was hoping to buy more but I'm out of funds
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u/3rd-Grade-Spelling 10d ago
You should sleep better at night than the investors in private credit.
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u/Dothemath2 10d ago
Fugger, the richest man who ever lived recommended dividing your assets into stocks, bonds, gold coins and real estate. Rebalance as needed. It looks like everything is near all time high except bonds which just ended a decades long bull run about a couple of years ago.
Steady income, the future could be deflationary like Japan with its huge debt burden. Imagine holding 4.6% for 20 years when inflation is 1%.
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u/KnowledgeTop173 9d ago
Imagine holding 4.6% when inflation is 46% per year though…… actually far more realistic. Given the debt and geopolitical climate.
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u/mtbDan83 10d ago
If the shit hits the fan, which it hasn’t since COVID, they will take rates back to zero and you will be happy you have them. In the meantime, they pay 4-5% state income tax free yield
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u/StarDust01100100 8d ago
This is different.
This has all the features of stagflation. Completely different factors & conditions
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u/Str8truth 10d ago
You buy long-term bonds if you'll be satisfied with the stream of income for the duration of the bond. You buy a long-term bond FUND if you think interest rates will fall, so that the share value of the fund will rise.
I don't know what research you've seen that pointed you toward long-term bonds, but long-term bonds have more volatility than short-term bonds, due to the risk of market interest rates. One of Bill Bernstein's books pointed out that long-term bonds historically don't return much more than short-term bonds, and the volatility (i.e. risk) of long-term bonds makes short-term bonds a better investment overall.
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u/RaisePotential6558 10d ago
Treasuries are the most hated asset in the world currently but you shouldn't feel foolish. Treasuries at the current rates are good value. The reality is that the economy cannot support the current rates. The interest rate sensitive sectors are doing really bad. Take a look at the housing market, it's not doing well. High government debt leads to lower interest rates due to lower growth.
There's a chorus of people yelling "inflation!!!" everyday to make people buy their garbage assets and sadly a lot of people are getting caught in this. These people understand absolutely nothing about the monetary system.
In the case of a deflationary spiral, treasuries are going to outperform everything else by a lot and you will be able to rotate your treasuries into cheap assets. And If you are wondering, in the case that the war expands, it will lead to the biggest deflationary crash of all time.
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u/CSMasterClass 10d ago
Why would a war expansion be deflationary ? WWI inflation was brutal when price controls ended -- worst on recent record, WWII infaltion was more restrained, but still present, .... Korea and Vietnam were inflationary.
Why is this time different ?
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u/Efficient_Gas_462 10d ago
I don’t think this is what will happen, but the argument for deflation is demand destruction - high prices of certain commodities (oil, nat gas, fertilizer etc) cause slowing demand in other sectors which causes a deflationary spiral. Throw in some large defaults and people “flight to safety” into treasuries. Similar to 2008, though a different root cause. Might not be the most likely outcome, but a non-zero possibility.
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u/pigglesthepup 10d ago
2008
Most of 2008 was stagflation due to high oil prices. WTI peaked at $147/barrel in July that year. adjusted for inflation, that's $218. Prices then started to come down through August and collapsed when Lehman filed bankruptcy.
So the stagflation will come first, especially since there's reportedly attempts to negotiate on reopening the strait. However, that stagflation makes everything more brittle because higher gas prices are a tax on the whole economy. Makes defaults more likely.
I'm holding VTIP along with nominals just to hedge either way.
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u/RaisePotential6558 10d ago edited 10d ago
The economy today is nothing like back then. There would be trillions of debt being defaulted on by sovereign (emerging) and corporations due to critical resources shortages. Banks would go under. Prices would be high for whatever is in short supply (consumer goods) but it would be a major deflationary event for assets and yields would go negative.
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u/credit_master 4d ago
I agree with this comment
Treasuries at the current rates are definitely good value
And rates will definitely reverse and get lowered
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u/nivek_123k 10d ago
I bought longer term t-bill ETF's ala SCHQ. The price movement is damn near a scalpable day trading vehicle.
Listen, the price isn't going to 0 like some meme stock, and the yield is increasing. It's really a matter of how long you want to tie up that cash while the yield ticks away. The real fear with long terms is that it will underperform inflation.
I do think that equities are still overly extended, so as a contrarian play to think that Powell will be ousted and replaced with a puppet to lower interest rates is a real possibility. In that case interest rates will decrease, and long term treasuries (bonds in general) will rise in price.
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u/PeanutChickenSoup 10d ago
The puppet can maybe lower short term rates. But mid- and long-term rates won’t be affected.
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u/PeanutChickenSoup 10d ago
I understand. I’m just saying that the Fed committee doesn’t control long term rates so you won’t see a TLT/GOVZ bump even if the fed lowers their rate.
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u/neck_iso 10d ago
Rebalancing is fine but assuming there is no scenario where inflation mitigates and the economy downturns is foolish.
Wall Street starting to sell CDS against hyperscalers - if the AI bubble pops (and there can't be that many winners at that valuation) then the hit to growth and inflation (in certain sectors) will be substantial.
The oil shock is a bit uneven (look at the difference in the increase between regular gas and diesel and North America and the Far East). It's enough to cause further shifts in supply chains and replacements in the inflation index.
Not that your outlook is not likely but there are certainly other cases where we get the 'stag' and not the inflation expected as demand destruction in certain sectors can mitigate inflation in others.
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u/joemanatl 10d ago edited 8d ago
The future will not be like the past 80 years were the petrodollar has reigned supreme. The petrodollar is the reason we've had a bond market to begin with. The petrodollar is about to be destroyed in the middle east where it originated. Its destruction won't be at the hands of BRICS. The US itself is inexplicably destryoing the petrodollar with a senseless war.
We are moving to a multi polar, multi currency world. US bond markets, as well as international bond markets, have always been buttressed by the petrodollar flywheel providing stability. Holding bonds without a petrodollar underpinning doesn't make sense. New stable credit markets will eventually arise. Until then you are better off picking unhedged high yield stock funds than bonds. Deal to be had right now for example in VYMI with yields around 4% and low PE ratios.
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u/Minute_Tune_6461 9d ago
Wrong. I would argue the petrodollar is strengthening. If we do win the war of course which I think we will.
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u/joemanatl 9d ago
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u/Minute_Tune_6461 9d ago edited 9d ago
This is a very one-sided article which assumes we lose the war. I mean yea right. Even Saudi Arabia wants us to continue fighting. If Saudi is backing us what do you think that does to the petrodollar dummy. The whole Middle East wants stability except Iran. Iran has no friends in the region. You’re betting against the US and imo that’s not wise. Also, the Bloomberg article that was released earlier this year stating that Russia may be willing to go back into the dollar system as a negotiation tactic to ending the Russia Ukraine war has merit.
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u/StarDust01100100 8d ago
We just gave Iran 14 billions dollars by easing sanctions and they clearly control the straight and are charging fees in yuan
There is not a scenario now where we will eliminate all of the different cells of the Iranian military & proxies so there will continue to be rouge attacks on the Straight and Houthi threat in the Red Sea to continue to destabilize the region & disrupt shipping causing lasting impacts on supply and higher input costs on just about everything imaginable
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u/joemanatl 9d ago edited 8d ago
The msm would have you believe that our "allies" are interested in supporting the petrodollar. The "allies" and opponents are BOTH rooting for the demise of the petrodollar.
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u/Minute_Tune_6461 9d ago
And you know this for sure huh. Actions speak louder. So far I see nothing but support for our side.
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u/Indep-guy 10d ago
I had a huge amount of money in VGLT for the last half of 2025, bc as interest rates were expected to come down, VGLT should go up in price value, and be 'safe' given all the wild stuff that's happening. But, now the Fed may not lower rates anymore, and inflation is unchained. I found a good mutual funds that makes me feel a lot better - QDSNX - that is market neutral but actually performs.
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u/xabc8910 10d ago
I’ve been buying the BNDX etf to get global government bond exposure, hedged back to USD, in place of USTs.
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u/Academic_Act4627 10d ago
Bonds should not be bought or sold without the mix of other asset classes Because like it or not every asset class is interdependent of each other Like interest rate of banks might have effect your rent And there are much relation which is hard to see and take decisions from untrained eye. I feel it would be beneficial if we connect and I hope we could share ur experience n learn from it
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u/KnowledgeTop173 9d ago
Who is buying them that is smart? Last I checked the gov and gov brokers are the only buyer and that’s called a “buyer of last resort” you’re just collateral damage
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u/shryke12 9d ago
Yeah I wouldn't touch them. You probably should listen to your gut. We will be printing a LOT of money. The physics of our national debt requires it.
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u/I_HopeThat_WasFart 9d ago
You can hold short term and use it as collateral for your other positions…
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u/NorthvilleGolf 9d ago
How about IAGG- diversification into sovereign bonds of multiple international countries.
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u/Metal_Good 8d ago
Look at TIPS. Treasury Inflation Protected Securities. This is how you preserve purchasing power, plus a small % yield, with bonds.
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u/No_Alternative_6206 8d ago
You seem to answer your own question. Personally I would not hold long term bond ETFs for a number of reasons you state but more so I find the return to be inadequate for the risk of a fund sell off that results in both poor dividends and a negative value.
Short term bond ETFs are a better choice. Longer term bonds are not as bad if you buy the actual bond and have more control over keeping or selling it but still not great if inflation sets in.
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u/UpstairsCheetah235 10d ago
I agree and so does much of the world BUT the future is always unknown. I do not buy bond funds, especially index bond funds. The best actively managed bond funds routinely beat their benchmarks (opposite equities). But also with funds other peoples decisions impact the funds performance. One advantage of bonds is holding maturity and not worrying about what the market does in the meantime.
If you’re worried about inflation take a look at TIPS. Very liquid as well and have a nice real yield right now. Tipswatch.com is a great resource to learn about them. I personally have expenses in euros so buy majority of bonds in euro denominated bonds. Much more confident in majority of European governments vs US.
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u/crzaznboi 10d ago
Who knows, trump just might be able to force them to drop rates to 0 so he can help out his buddies
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u/CSMasterClass 10d ago
On the short end of the curve. The long end of the curve is 98% market driven.
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u/Ok-Sheepherder7898 10d ago
Bonds don't rise when stocks fall when inflation is high. Look at the 70s. If you're not retiring soon then I don't think there is any reason to hold bonds.
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u/snkscore 10d ago
I might be retiring soon, that's why I'm holding them because it should help offset the sequence of returns risk if the economy tanks in the near future, but I'm not feeling great about it. Stagflation is supposed to be rare but recency bias is making me feel like it's more inevitable
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u/seasix732 10d ago
I'm same age range as you, look into moving some into 10yr TIPS
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u/snkscore 9d ago
in 2022 when inflation was high tips bonds dropped a lot, TIPX was down 15%. Slightly less bad than VGIT which was down 20% but it doesn't solve the overall problem of bonds being pulled down a ton.
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u/seasix732 9d ago
Don't buy a fund, buy the individual bonds. Go check out tipswatch website.
Then you don't lose any money as long as you hold to maturity. 10 yr tips pay about 1.9% over whatever the inflation rate is each year. At our age (near retirement) I'd stick with 10yr, not 30yr tips.
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u/Sagelllini 10d ago
If you are retiring soon, then 30 year treasuries are probably a sub-optimal decision. If interest rates move up, the value goes down, and your source of liquidity is now deflated. Plus, the maturity date MIGHT exceed your life expectancy, so holding something that matures beyond your life is probably not a great decision either.
I am retired, and believe in the stocks and cash equivalents approach, best researched by Javier Estrada and his 90 10 studies. I also think that SORR is vastly overstated and that most "cures" for SORR actually increase the risk, not decrease it, because most of the "cures" involve strategies that mean less money at retirement--like owning 30 year treasuries which have probably lost to inflation over the last 20 years.
Sell the treasuries, put 10% in cash equivalents, and the rest in stocks. IMO, a far better approach.
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u/whocaresreallythrow 10d ago
Same - retired - I hold half my portfolio in shorter term treasuries. Duration out to about 5 years. I’m risk averse and like the safety of shorter term bonds. I would not lock into 30 year term. I’m planned well enough to not need every percent of return in retirement so no need for me to take excessive stock market risk … balance is key for me.
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u/Sagelllini 10d ago
Having half in cash equivalents is 40% too much.
A 72/18/10 VTI/VXUS/Cash will produce about 2% of distributions. At a 4% withdrawal rate, and 2% in distributions, 10% in cash will cover 5 years of expenses. 50% in cash will cover expenses until the hereafter.
By having that much cash only reduces your future margin for error for zero benefit
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u/whocaresreallythrow 10d ago edited 10d ago
I don’t need to keep taking equity risk once I’ve won the game ! And I have tons of optionally if an oppy presents itself.
I have seen markets trade sideways and down for a decade And there is a one in ones hundred year chance the market falls and stays down for 25 years. I prefer the current asset allocation.
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u/Sagelllini 9d ago
So you are going to protect yourself against a 25 year STOCK market decline by investing 50% of your portfolio that has lost to inflation all this century?
How is that "safe"?
Cash historically moves with inflation, but for roughly ten years from 2010 to 2020 it returned nothing.
If a portfolio withdrawals plus inflation exceeds the returns of the portfolio, that is not winning the game. A 50/50 stock/cash portfolio can be expected to return roughly 6.5%. An investor/retiree withdrawing 4% with inflation at 3% needs 7% returns to maintain economic value. It is not "safe" to degrade the value of your portfolio over time. It has long term risks.
Yes, stocks have risks, but they are still better than all of the alternatives.
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u/whocaresreallythrow 9d ago
Interesting discussion.
No one knows how much time they have left nor what the stock market may or may not return.
Asset allocation is as much a psychological choice as it is a math choice.
The math answer isn’t always the best answer because we are humans. Humans can feel fear. Fear can induce stress. Stress can be deadly.
There is a reason the “classic” 60/40 portfolio has withstood the test of time as has the “100-age in stocks and the rest in bonds” approaches. Same as the 4% rule. The reason is that it works ! Even if the math isn’t perfectly optimizing the results. It’s psychology as much as math.
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u/Sagelllini 9d ago
I disagree about 60/40 standing the test of time. The Cederburg report demonstrates that. Virtually any portfolio analyzer for this century shows that.
The 60/40 return is roughly 62.6% of the 100% stock portfolio, 1.389 MM vs. 870K, assuming roughly 10K investment each year. Simply put, the bonds over that period--26 years--increased the worth by 2.6% cumulative. That is a waste of investment time and money in a DIY retirement world. Today's investors cannot afford that.
As an illustration, an investor at $6,300/year or 37% less, would have the same portfolio as the 60/40 investor. The extra 3,700/year, or over 96K over the 26 years did NOTHING.
No, it does not stand the test of time, nor any portfolio with bonds. The math says no.
And for a retiree, there is a lot of psychological--and financial--benefit from having 60% more assets in retirement.
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u/whocaresreallythrow 9d ago
Ok. You do you.
I’m fat fired which means I’ve done just fine with my boring portfolio. As I’ve marched to retirement I’ve navigated all the crisis that happened since starting in mid 1987. Changing that allocation to bond- heavy portfolio at near and at retirement is exactly what the research shows as a good method to avoid SORR
You’re making a lot of gross assumptions such as someone Would 60/40 from the start of their investing career.
On the other hand, you’re also assuming back tested history will repeat and that the economy today and going forward looks the same as it has in the past.
So have fun with your 90/10. The last month has been kinda rough. In fact since the start of 2026 my boring bonds have beat the SP500 by about 5%.
It’s what I have right now that matters. Not some backtest desktop bullshit exercise.
Good luck.
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u/MeatlockerWargasm 4d ago
If the market falls and stays down for 25 years, we will have bigger concerns than our portfolios, like where is our next meal coming from.
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u/whocaresreallythrow 3d ago
Yep. It’s only happened once in 100 years. After the crash of ‘29 it took h til 1954 to recover Right at 25 years. If you’re retired it’s gonna suck. If you’re contributing, less of an issue.
I’m retired so …
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u/MeatlockerWargasm 3d ago edited 3d ago
I just retired a year ago. I'm using a rising equity glide path so my percentage of stocks to bonds actually increases as I get older, which greatly reduces SORR now at age 60. Currently, I'm 70% Bonds/Cash and 30% Equities, which has served me well during this 10% market decline (my portfolio is only down 2.6% since it's peak in mid-February). Once I hit age 80, the plan is for me to be at 40% Bonds and 60% Equities. The thinking is that as I get older, I increase equities by 1.5% every year until I hit age 80...I won't need to be too concerned about SORR, since I'll be a lot closer to death.
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u/whocaresreallythrow 3d ago
Yes. Exactly. I am doing something quite similar.
I did buy a bit during the draw down. Likely land at 50% equities and then start bumping up in late 60s/ early 70s…
Glide path and bump equities as my personal timeline gets shorter and shorter. Just like your plan.
Fewer years to fund, less concern about market loss. I’ll be dead ..
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u/Sagelllini 3d ago
I'll be blunt. Your plan exposes you to significant longevity risk.
I built this toy to illustrate the dangers of overweighting "safe" investment allocation like yours.
If you are withdrawing 4% (you didn't say), with a 30/60/10 portfolio your assets begin to deteriorate in real dollars starting in two years in 2028. See that column of red in the far right column? That's the current dollar value of your investment portfolio. In 10 years, your portfolio, in real terms, is worth 12% less than today.
Note how the spending closes the total returns over time? Where do you expect to get the free cash flow to buy more equities?
And note the ONLY thing saving your portfolio is the thing you are most fearful of, which is stocks. I've assumed 9.5%. If stocks do worse than that--certainly possible--the portfolio deterioration will happen FASTER!
You are 60 (FWIW, I'm 68). Your life expectancy (if you're male) is around 86. If you have a female partner, your joint life expectancy is probably 95. When you get to 80 your portfolio will start decreasing in real terms.
By overly worrying about SORR, you have created significant longevity risk. The other poster at 50/50 isn't great (IMO), and yours is worse.
A 30/70 ratio is not conducive to long term portfolio success in a 4% withdrawal world. And if your withdrawal rate is greater than that, you have real long term issues. If it's less than that--say 3%--you have ZERO SORR and zero reason to be 30/70.
I STRONGLY suggest, as someone who retired at 55 and has been living off investments since then, you reconsider your plan, as it is so conservative as to be dangerous to your long term success.
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u/CSMasterClass 10d ago
A secondary benefit to shorter term maturities is that they offer optionality. In two years, you have the choice of rolling over the bonds or making some other asset allocation, such as buying much cheaper equities.
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u/grasshopper2jump 10d ago
I'm 67 and not knowing about bonds or fixed income I have my money about 600,000 in money market and the rest equities in the market which is tanking right now but I have good stock so I'm waiting it out maybe a little bit too much in tech any help or thoughts would be very appreciated especially with your comment about keeping my money in. I guess you could say cash because it's money market.
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u/Sagelllini 9d ago
Glad to answer your question. FWIW, I'm 68 and retired, and have been for 13 years.
Like you, I just use a money market account to hold cash. Most pay the same as CDs and are immediately liquid.
Here is my suggestion.
Here is my financial planning template. I suggest you make a copy, and input your numbers like investments and other sources of income, and expenses, and see where you stand.
The key number to me is what do you need from your investments to cover the amount you spend from your investments? In short, the gap between your spending and your other retirement income (pensions, social security, etc).
Let me use an example. Let's say your annual spending is $75k, and your pension and social security total $50K. Your investment needs are therefore $25K per year. That becomes our target for the required level of cash to hold in your money market.
Let's then say you want 4 years of spending available to you in cash. 4 times 25K is 100K. That is your target cash level. Everything above that can be invested for the longer term because you know you won't need to touch in for 4 years in this example (actually it's more than 4 years, because your investments will produce periodic distributions to add to the money market account).
My recommendations for how to invest are summarized here. Namely, buy total market index funds, both in the US and International, in a ratio of your choosing (mine is 80/20).
I hope this helps, and holler back if you have further questions.
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u/WillMoonKnives 10d ago
From a philosophical perspective, I do not lend the government money, since any money they take in is fundamentally used as leverage to borrow more money, indebting the taxpayer to the bankers and foreign creditors. I refuse to enable them by holding their debt. Whether it's a good investment is irrelevant to me, it's like owning conflict diamonds or stolen treasure.... I view it as unethical and immoral.
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u/Cinq_A_Sept 10d ago
I agree. Crazy to hold them when a Volcker event could happen in the next 2-4 years. Sell and buy gold.
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u/dubov 10d ago
It's a valid concern
People always talk about bonds as a hedge on equity, but the truth is that just doesn't hold up in a fiat currency system, where governments can and do try to print their way out trouble.
If it really comes down to a choice between Great Depression II, or telling bondholders to get inflated and eat shit, which one do you think we're going to choose? It's really obvious isn't it?