How Bond Investing Can Still (Sometimes) Fail | WSJ

Buying U.S. government bonds is among the safest investments you can make. In fact, people often put their college funds and retirement savings into bonds. In the midst of recession fears, bonds are often referred to as “risk-free” because there are only two ways you can lose money:

1.) The government defaults, which is almost certainly not going to happen, or
2.) You sell the bonds early at a loss, which contributed to the collapse of Silicon Valley Bank

This might make you wonder how safe bonds really are, so WSJ explains why they’re still a good investment.

0:00 Recession fears have caused investors to flee to safe investments
0:46 Savings bonds, the primary market and government defaults
3:36 Other government bonds, the secondary market and selling at a loss

WSJ Glossary
Markets and economics are complex. It's easy to be overwhelmed by a sea of wonky indicators and lose track of why they matter. This series breaks down the basic terms and ideas that move the markets.

#Bonds #Investing #WSJ

[rtu]

Just hit $216k in my emergency fund, now I'm ready to dive into investments.

[NicholasBall]

Despite rising bond yields and falling stock prices, the markets remain uncertain about whether the Federal Reserve will maintain its objective of raising interest rates until inflation is subdued. As I contemplate whether to sell my $401k in equities, what's the most effective strategy for capitalizing on the current downturn in the market?

[Rochelletrem]

The most important thing that should be on everyone mind currently should be to invest in different sources of income that doesn't depend on the government. Especially with the current economic crisis around the word. This is still a good time to invest in various stocks, Gold, silver and digital currencies

[darnellcapriccioso]

It was a very bad decision to remove the Glass-Steagall Act in the late 1990s, which led to the spectacular failure of huge banks during the financial crisis of 2007–2008. To prevent another disaster, Dodd-Frank and this statute both need to be reestablished right away. What happened with SVB is only the beginning of what will happen if nothing is done to address the current situation.

[leondonald]

It is a government inspired crisis this time. The Treasury have to sell Bonds to cover the trade imbalance and the government spending imbalance. In order to sell them they have to raise interest rates and the old long-term, low risk, low interest, AAA investments (including Treasury Bonds), held by the banks (often due to government regulatory policy), become next to worthless. The next milestone is the 15th when the government issue a new batch of Bonds. I have approximately 350k stagnant in my portfolio that needs growth. What is the best way to take advantage of this downturn?

[Felix-uwnv]

The FED raised interest rates, not the treasury

[jasongonzalez]

Nice video but to clarify, the treasury doesn’t increase interest rates. That’s the responsibility of the federal reserve.

[Aladhard]

Do people say treasury bonds have no risk? SVB were holding long duration bonds wth no hedge (if I remember correctly). A poorly managed bank with no chief risk officer for the longest time. Entry level finance classes discuss the inherant risks associated with bonds compared to tbills. 0:30

[HafezBd]

Even if bond yields are increasing while stock prices are decreasing, the markets are still skeptical whether the Federal Reserve will stick to its goal to raise interest rates until inflation is under control. While I'm still debating whether to sell my $401k worth of equities, what is the best way to profit from the present down market?

[Patricia-Margaret]

Nobody can become financially successful over night. They put in background work but we tend to see the finished part. Fear is a dangerous component, hindering us from taking bold steps we need in other to reach our goals.

[ddeeccaaddeennccee]

So... correct me if I'm wrong but if you always need new money coming in to pay the old investors interest/mature bonds... isn't that a ponzi, I'm not trying to be smart, so.eone correct me here isn't that the exact definition of a ponzi???

[paillette]

This is a nice explanation. Thank you. Maybe explaining the world of bond trading could be next?

[bigtee]

Check out the story of how the Government of Ghana defaulted on its bond debts and bond holders had to suffer . Very Sad. Had me rethinking about investing in bonds

[Fightback]

bonds are worthless if the bond yield is lower than the inflation rate.

[ModernValue]

So, just don't buy a bond you can not afford to hold to maturity?

[SaadKhan-ljrd]

At 5:16, the journalist notes "the Treasury increased interest rates" which is not correct. The Federal Reserve, a separate and independent body, increased interest rates. Otherwise a great summary of the bond market and some Bond 101!

[wildmiku]

That's why when we draw capm, the starting point is always on the y-axis above the origin.

[alamdarhussain]

I have a very historic USA bond. It was purchased in 1934 by submitting tons and tons of Gold. Now dont know how to cash it.

[pamelahomeyer]

The biggest problem here was why did Silicon Valley Bank feel that it had to sell the bonds and that was because they had made loans to people who could not pay them back because those companies were high risk or fraudulent

[CommandoX]

This is an excellent, well-accessible introductory video.

Thank you.