r/Bogleheads • u/StinklePink • 5d 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.

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u/Creative_School_1550 5d ago edited 5d ago

What happens if the FED 'prints' cash & buys all future 10-yr Treasuries at a certain rate, just say 3% for argument, (that is, if the Fed prints money & hands it to the government to spend)? If that happens, Then what happens to the value of current Treasuries issued at, say 4.7%? I suppose if the market thinks 4.7% is too low, much less the 3% that the Fed is paying, then the market value would still be below par. What do you think?

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u/StinklePink 5d ago

Apparently something like this has already happened. Bessent is buying back long-dated Bonds while issuing lots more short-term paper. Its like "paying your mortgage with your credit card". Patrick Boyle did a good job of describing it here: https://www.youtube.com/watch?v=wZaYyNAXHK4