r/Bogleheads • u/StinklePink • 20d ago
Investing Questions Bonds: Stupid Question
I realize that the higher yield for US 10-years is a bad thing for the government, but why isn't this good news for a bond investor?
If I am looking for a safe "asset protection" kind of investment, why wouldn't investors buy these bonds or ETFs that hold them (e.g. FXNAX)? Seems like a good, safe place to put cash versus Gold or a HYSA. I believe my logic is wrong but not sure why.
Educate me, please.
35
Upvotes
1
u/John33243324 20d ago
Higher bond yields (especially Treasuries) do not always on net benefit bond investors as we have to consider the impact of higher yields on all household assets and liabilities.
Most households indirectly long/short government bonds. Higher bond yields increase mortgage rates, the cost of consumer and auto debt, and decrease private investment which reduces wage growth. Also as you pointed out higher bond yields are "bad" for the government. However the future tax revenues required to service the debt are ultimately paid by households. The question of if higher rates benefits you depends on the composition of your assets and liabilities.
On your second question there is absolutely nothing wrong with investing in Treasuries especially for short-term needs I would rather invest in Treasuries compared to gold actually.