Thread: how does the f fund get effected by rate cuts or stock drops

I think ppl are just not buying US bonds anymore and they also dont buy stocks. They just are waiting for the right moment to get back into stock market with cash.

Originally Posted by mino

i alway thought that when a rate cut happened or stocks dropped the bonds benifited . it does not seem the case with the f fund . can someone explain what causes the f fund to rise and fall with their opinions or facts

DCguy's explanation is pretty good. The traditional relationship between stocks and bonds were, sell stocks, buy bonds and vise versa. When a rate cut came, get out of stocks and buy bonds. Stocks start up take your money from bonds and buy stocks. Now it appears people are getting cash or buying commodities instead, thus the "new" disconnect.

F fund is composed of different bonds. Bond prices fluctuate on their issued interest yield. A bond with a higher yield will rise in value if present interest rates drop. If interest rates rise than a bond with lower yield wil fall. Then we have a modifier of the quality of the bond. A bond which has higher risk of default will trade at a lower value despite promised return.

It might have something to do with a little bond scare thats going on right now

i am interested in the f fund which is comprised of an index section of funds ( no savings bonds , just bank transactions involving bond purchases ) what is the problems going on in the bond sector now ? i though there waqs som solutions given in the last several weeks for the bond industry . i just cant seem to figure any economic rules that apply to when the f fund will go up or down .

Originally Posted by mino

i am interested in the f fund which is comprised of an index section of funds ( no savings bonds , just bank transactions involving bond purchases ) what is the problems going on in the bond sector now ? i though there waqs som solutions given in the last several weeks for the bond industry . i just cant seem to figure any economic rules that apply to when the f fund will go up or down .

Read my account talk thread.

Originally Posted by 350zCommTech

Read my account talk thread.

i do not understand what you are talking about

Originally Posted by mino

i do not understand what you are talking about

mino,
Welcome! Here's the path to what 350 suggested (thought I'd help him for once to get you directed).
TSP Talk Forums > Allocation Talk > Members' Account Talk > 350zCommtech's Account Talk

Or click this link to his AcctTalk thread > http://www.tsptalk.com/mb/showthread...410#post153410
Recommend read up first, review the last few days/even couple weeks -for info there on F, absorb, then ask if more is needed. Just a suggestion, especially since 350's supposed to be on sabbatical (-well anyway...)
Best of Luck!

There are two prices in a bond. The first is the price of treasuries which are effectively the mark for a zero in the other price, the price of credit. What's making the F fund difficult to follow since January is that while treasuries keep moving up in value (on big down days for the stock market), the price of credit keeps the value of the non-treasury bonds declining (and the G fund's zero real duration means that holders there get the lower yields but not the price increases on treasuries).

So the distance between the F funds bonds and treasuries is widening even as the value of a zero credit risk portfolio is increasing. Since on the days when one moves sharply the other typically moves the opposite direction, we get some interesting shifts.