Mr. Buffett, are major Wall Street banks that actively buy US bonds also bullish?

moomooニュース米国株 wrote a column · Aug 9, 2023 00:39

The US bond market on the scale of 25 trillion dollars was hit by three last week: a downgrade due to Fitch, mass issuance of US bonds, and a reduction in the Japan-US interest rate difference due to the Bank of Japan's YCC policy adjustments.

After a sharp decline in the bond market, $Goldman Sachs(GS.US)$、 $JPMorgan(JPM.US)$、 $Morgan Stanley(MS.US)$And so on, according to the latest report from the major banks on Wall Street,It is speculated that the oversale of US bonds may have gone a little too farhas started.

Mr. Buffett, are major Wall Street banks that actively buy US bonds also bullish?

Also, since Berkshire, led by Mr. Buffett, reduced its stock portfolio and slowed down share buybacks, it is also attracting attention that cash on hand came close to a record high in the second quarter.Of the $147.4 billion in cash on hand, more than $120 billion has been invested in short-term US bonds。

After the sudden downgrade of US ratings by Fitch, Buffett said BerkshireThere is no change in the idea of buying large amounts of US bondsIt was expressed. It also conveys the statement that “the only problem next Monday is whether to buy 3-month or 6-month short-term government bonds for 10 billion dollars.”

There is also a tendency to compare Mr. Buffett's purchase of short-term US bonds with Mr. Ackman's short sale of 30-year US bonds. In response to this, Ackman said, “We actually have the same idea. Buffett will not buy 30-year US Treasury bonds at levels close to current yields.His purchase was simply fund management using short-term government bonds, and we also manage funds with short-term government bonds in the same way」。

Making long-term investments with dividends in order to obtain regular returns is part of the characteristics of Buffett style investingIt has been pointed out. Since the US Federal Reserve (Fed) has continued to raise interest rates over 1 year in the past, yields on short-term government bonds with a redemption period of less than 1 year have risen drastically, and they have remained at a high level since 2001.

According to the British Financial Times (FT),For many years, Berkshire has held short-term government bonds to prepare for catastrophic insurance claims payments and to prepare billions of dollars in cash so that they can be bought at any timeIt's called.

The US short-term government bond ETFs that are attracting attention are as follows.

$SPDR Bloomberg Barclays 1-3 Month T-Bill ETF(BIL.US)$: The amount of assets under management is 27.632 billion dollars, and BIL is linked to the market weighted average stock price index targeting all publicly issued zero coupon US bond stocks with maturities of 1 month or more and less than 3 months.
$Short-Treasury Bond Ishares(SHV.US)$: The amount of assets under management is 19.012 billion dollars, and SHV is linked to the market weighted average stock price index of bonds issued by the US Treasury with a remaining period of 1 to 12 months.
$Schwab Strategic Tr Short-Term Us Treasury Etf(SCHO.US)$: The amount of assets under management is 12.396 billion dollars, and SCCHO is linked to the market value-weighted average stock price index of bonds with a remaining period of 1-3 years issued by the US Department of the Treasury excluding STRIPS.
$Ishares Trust Ishares 0-3 Month Treasury Bond Etf(SGOV.US)$: The amount of assets under management is 12.286 billion dollars, and SGOV is linked to the market-weighted average stock price index of US bonds, which reach maturity within 3 months.

●What are short-term government bonds?

Short-term government bonds are bonds issued by the government and the redemption period is usually within a few months to 1 year. Short-term government bonds are issued based on government credit and are generally considered low-risk investments.
Short-term government bonds have become a popular option for investors who want to maintain their investment principal and receive interest in the short term.

●How do interest rates affect short-term government bonds?

Interest rates and bond prices are inversely correlated; if interest rates rise, bond prices fall; conversely, when interest rates fall, bond prices rise. This principle is called interest rate risk, and it is also applied to short-term government bonds.

●Advantages and Disadvantages of Short-Term Government Bond Investments

Short-term government bonds bring various advantages such as safety and stability, but investors need to pay attention to potential risks such as declining returns and inflation risks.

Short-term government bonds are supported by the government's ability to collect taxes and print, so in generalIt is considered a low risk investment, for investorsPredictable revenue streamsbecomes.

Also, in generalShort-term government bonds are more liquid than long-term government bonds. You can easily buy and sell on the market without having a significant impact on prices.Short-term government bonds are less likely to be affected by interest rate fluctuationsTherefore, the potential impact of rising interest rates on the market value of government bonds will also decrease.

However,There is a possibility that fixed-interest payments on short-term government bonds will not keep up with inflationIt is necessary to keep in mind that choosing short-term government bonds rather than potentially high-yielding assets will miss out on better returns during periods of economic growth or when market conditions are favorable. Also,Short-term government bondsIt is still affected by changes in the interest rate environment, and there are cases where bond prices fall due to rising interest rates.

ー Moo Moo News Sherry, Citron

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