Bond funds, debt ceiling, and august.

[rj.phila]

hi all, im wondering if you guys who know/follow the bond market might weigh in on something. im planning on buying into a few bond funds-both corporate and treasury based-and im wondering what the worst and best case scenarios might look like for waiting until september to buy in. obviously, by aug. 2, something of SOME sort will have happened in regards to the debt ceiling, thus im picking september as a time when it will have either sorted itself out or the s*** will have hit the fan (highly unlikely, of course). these would be "long haul" funds, so being out of them for a few months in the scope of 30+years doesnt seem like a high price to pay, in terms of waiting it out.

i guess what i really want to know is this: is there a scenario in which in hindsight, a june purchase would have looked really great vs. a september purchase? i know that there has been a lot of doom and gloom talk around bonds for years and years. i understand the scenario where one could look back in september and say "glad i waited". i need a plausible argument for the opposite(if there isnt one, that's fair too).

thanks for the help.

[jpg7n16]

so what's behind your desire to invest in the bond market?

are you looking for income? growth? stability? what are you hoping to achieve between june and september?

[rj.phila]

when i look at the history of bond funds, they just look nice and stable. all 3 of what you mentioned, really; although income and growth are relative, of course.

re: june vs. september: obviously, waiting til september to buy in would mean that i'd be in a place where there was resolution w/ the debt ceiling issue(and maybe less doom/gloom talk about deficits, bond mkts, etc). im trying to do a pro/con analysis for waiting vs. buying now. i can't really come up with a good reason to buy in now, but i also havent studied the full ins and outs of the bond market, so im trying to see if there is basically something im missing.

[jpg7n16]

well as a general principal, long term rates move fairly slowly (or at least slower than short term rates) - and the prices of the bonds are extremely dependent on market interest rates.

so could the long term rates fluctuate a lot between june and september? They could, but usually not too much. It's just one financial quarter.

The thing I'd be more conerned with is, is the investment suitable for you.


So if there is a bond/bond fund in the market today offering you a yield that you're comfortable with today, and a timeframe you like, and income that you're happy with today, there's no guarantee about what will happen in the future. If it's a good deal today, and a good fit for your overall financial picture, then go ahead and buy today.

If you're not sure it's a good fit overall, then hold off, do some more research, talk to a financial advisor about what's best for you - put all the facts together and come to a better decision.

[rj.phila]

thanks. yes, i've crunched the numbers on both a TBM fund and an intermediate treasury fund, and from a historical perspective, i like them on really all aspects. if it were any OTHER quarter, or 3 month period, i wouldnt think twice; i just dont know what the bond market would do in the (extremely unlikely) instance where talks of raising the debt ceiling actually stretch out close to aug 2, cause frankly, i dont understand it well enough. i generally dont care what pundits think, but a few guys i DO listen to like nouriel roubini, paul krugman, et al have, stated that if the dialogue pushes up against that deadline, it could affect treasuries/bond mkts. this has caused a bit of trepidation on my part, in relation to timing.