RetireJapan

With the ECB aiming to lower interest rates to 2% or even lower, and the BOJ poised to increase to 1% or higher, I’m thinking it’s probably a good idea to dump my BNDX ETF holdings bearing in mind the strengthening yen, the geopolitical risks in Europe, as well as prospects of higher USD Euro hedging costs for the USD hedged ETF (56.60% of BNDX is composed of Euro Zone bonds).

Anyone else around here thinking of dumping or paring down on BNDX?

I don't react to news stories when it comes to making investment decisions.

Don't own BNDX, but do own a small amount of the eMaxis Slim developed country bond fund.

Well, there is the market condition of course, but of more immediate concern is that the price of BNDX has gone down 3.20% in yen terms since last summer. Since BNDX's annual yield is 4.20% or thereabouts, you'd need balls of steel to hang on to it under current conditions...

I just checked and see I have a position of 180 in BNDX.
My Open P/L is a negligible -$22.50. I guess in yen terms it would be in “profit” from the Japanese tax accounting perspective if I happened to sell it.

I invested the dividends earned last year in certain ADRs (and got quite lucky so far with that) as part of my developing markets allocation, plus buying some more GLDM as I want to increase my gold allocation in my portfolio.

I haven’t thought about selling BNDX, or any of the big chunky ETFs I own for that matter. I own all of them as they go towards the asset allocations in my portfolio.

If the stock markets plunge by 30-40% then I could well be tempted to sell at that time, or if something BIG changes. But my overall portfolio has done nothing significant yet this year, and I’m not really expecting it to. The last two years were good so this one might be a dull one.

So, my balls are in quite a normal state and oblivious to the condition of BNDX.

If I were to dump my BNDX and buy something else, I’d be changing my asset allocation, by more than a few percent. I certainly don’t want to change my asset allocation every time some clueless central bankers somewhere fiddle with their short term policy rates. (I recall just last September the FOMC started cutting their policy rate by eventually 75 bps and the US 10 year treasury yield went in the opposite direction.)

I continue to keep my speculative activities cordoned off outside my main securities account. That’s what I pay attention to on a day to day basis. Even then, I don’t pay much attention to central bankers, because I can’t remember ever making much speculative profit that way!

Hmm… fair enough!

I’m in a somewhat different situation because my BNDX is down 1/4 million yen and I will be able to make good use of the tax loss harvest from dumping it.

It’s still only February, and ideally you’d sell for a profit rather than a loss… owing taxes on profits is a better problem to have.
It’s your portfolio, but I hope you aren’t over transacting.

Thanks. That is exactly the sort of advice I come to this board for! I’ll definitely mull it over before hitting the sell button.

Since BNDX is mostly euro zone bonds with some JGBs, and bonds from Canada, the UK and Australia plus a smattering of smaller countries bonds, the question I need to ask myself is whether I want to bet on the price of BNDX going up or going down under current market conditions.

We know that Japanese institutional investors are fleeing in droves, so that’s why I mentioned balls of steel in order to hang in there in spite of market sentiment.

What Japanese institutional investors do has zero influence on my personal decisions.
I dunno but I guess they are insurance companies and pension funds and the like? Their motives are different to mine.

Try this - pull up a monthly chart of BNDX and see where we are in the broader scheme of things. It looks like 5 years ago would have been the time to sell, not now!

Unless of course, you really have better things to do with the money. But locking in a loss had better be worth it.

You're talking about this USD based chart right?



In yen terms though, BNDX's price didn't tank the way it looks in this chart because the yen kept weakening during the past 5 years during which Japan had super low interest rates, whereas Europe and other developed markets hiked their rates in response to high inflation. It's difficult to say when is the right time to sell, even though locking in a loss is as you say not ideal.

As for institutional investors, I ask myself so what are they buying instead of Euro Zone bonds, and apparently they're buying Japanese Government Bonds which are now paying modest interest which do not need to be currency hedged. Something to be said for following the smart money!?

sutebayashi wrote: ↑Sat Feb 15, 2025 11:28 am locking in a loss had better be worth it.

Isn't it a bit different with bonds? Because the price reflects the value of the coupon payments. So if interest rates rise, you've already lost. You can choose to sell at a loss, or hold and accept lower dividends than you could get elsewhere.

Disclaimer: I never understand bonds, may be completely wrong.