Share prices of a lot of bond funds (muni, corporate) have dropped quite a bit in the past month or so. Time to buy yet in order to reap a nice capital gain down the road?
I have done this before, with muni bond funds, and did it inside a Roth IRA. You might say that sounds crazy to have muni bonds in a Roth, but getting some 10% to 15% short term capital gains tax free makes me smile.
Hi @blacktreechaser,
With another rate hike looming in December, I expect the prices will continue to drop for a while, but I have been accumulating shares for a few months now.
Once rates ‘normalize’ the prices should turn.
Does that help you?
Gene
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What if rates are right now in the process of “normalizing”? Looking at a 50+ year chart seems to indicate so. Maybe the 10-year between 5% and 6% is normal?
Of course if there is a deep recession, they’ll probably force rates lower for some period of time. But maybe not all rates. And maybe not for very long.
Predicting when interest rates will peak is difficult. High oil prices and the wars are major factors. Promised quick solutions have not happened. Who knows when those problems will be resolved. Rising rates should slow the economy and reduce inflation. But good inflation numbers could be six months ahead.
And note that rising interest rates causes NAV to fall and share owners to sell. That forces bond fund to sell at the bottom of the market—pushing down NAV still more. The problem can compound.
thank you for responding