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Personal Investments • VBTLX Price in response to interest rate cuts

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OK Guys,
All the math and theory is impressive but what does it matter if most of the securities held in VBTLX are not held to maturity?
We are looking at thousands of random changes within the fund holding period for all of the individual bonds.
As Grabiner points out the significance of the theory is that it informs us how bond math translates variability in interest rates into variability in bond fund NAV and the longer the duration the greater the multiplier. This is a real effect as there has been much wailing and gnashing of teeth over 15%-20% losses in bond funds in recent years.

You are right that in the end random changes are random changes and bond fund NAV can go back up (and down again) when interest rates change down (or up again). I wager that not very many people, if anyone, were not at least a little bit taken by surprise at the rate and magnitude of interest rate changes and associated losses, even if being completely aware of the math.

What is still true is that over time higher rates will benefit bond holders, but this is not a short run process.

Statistics: Posted by dbr — Thu Jun 27, 2024 8:03 am — Replies 47 — Views 4931



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