Why Bond Prices Don’t Concern Me

One of my readers asked me a question that I feel warrants a proper response here. 

He asked me whether I’m afraid of a bond market crash, and the reader wondered whether bond markets can plunge like stock markets.

The answer to both of those questions is no.

 Bonds have had a great run lately, as people have poured money into bonds to escape the uncertainty of the stock markets.  Bond prices have risen, and yields (interest rates) are currently low…much as a result.

 But bonds move so little.

For a reference, check out the chart below.

Barclays 1-3 Year Treasury Bond (NYSEArca) (2NOV12)This is a chart of the S&P 500 (in green) compared to the U.S. short-term government bond index (in blue).  Please note that these movements do not include interest rates on the bonds, nor do they include dividends for the stocks.

Notice that the S&P 500 gained 65% from 2003, then dropped 20% below the 2003 price, then surged more than 80% from that low.  This was a volatile period for stocks.

Bonds?  Yeah, they were volatile too.  You’ve heard it in the news.  Check out that blue line.  Not including interest, U.S. short term bonds are up about 6%, overall,  since 2003.  Note their relative stability compared to the stock index.  The bond indexed line (in blue) would normally be running almost perfectly flat.  It shouldn’t normally rise or fall much at all.  It should be relatively flat as it throws off interest, but that’s all.  Its popularity has seen it rise, and this is what people are afraid of.  Bonds prices could fall.

If bonds drop (let’s say) 6% people will freak, news headlines will run rampant, and it will be called the great bond crash.  If that happens, so what?  Bonds will be coming back down to earth.  You might not make money on bonds for the next couple of years (assuming a 3% interest rate per year and a sudden 6% price decrease) but the bonds you bought after the bond market “crash” would then earn higher interest yields.

If bonds become really unpopular, they could fall 10%.  Such a fall (in stocks) wouldn’t create too much concern in the stock market world.  But for bonds, this would be huge news.   If that were to occur, the interest yield on newly purchased bonds would increase.

This is how it works.  Assume that a bond index is priced at $100 a unit, and it pays $3 per year in interest for a 3% rate of return.

If the bond price fell 10% to $90, the bond index would still pay $3 per year in interest, but $3 is roughly 3.4% of $90, so the interest yield would rise for new purchasers.

Let bonds fall.  In fact, let them fall hard. 

I’ll be ready to rebalance my portfolio, as I always do, greedily adding what the world becomes fearful of.  And in the end, I’ll reap some nice profits.

Over the long term, you could do the same.

Rebalance, dollar cost average, stay the course, and ignore predictions.

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Andrew Hallam

I’m a financial columnist for Canada’s national paper, The Globe and Mail, as well as for AssetBuilder, a financial service firm based in Texas. I’m also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School (2nd Ed. Wiley 2017) and The Global Expatriate’s Guide To Investing: From Millionaire Teacher to Millionaire Expat (Wiley 2015). My mission is to educate, motivate and inspire people on basic retirement planning and best practices for investing, using evidence-based strategies. I'm happy to comment on your questions. However, please read the Terms of Use, Privacy Policy and the Comments Policy.

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60 Responses

  1. Rhys says:

    "Rebalance, dollar cost average, stay the course, and ignore predictions."

    Awesome, Andrew! This should be a bumper sticker.

    • Hi Scott,

      It doesn't say anything that I haven't said above. But I think I've been a bit more polite about it. If bonds fall 10%, people would freak. But it could happen. I say let it come. I will then sell some equities and rebalance. I hate to say that people are lemmings because that's not fair to the lemmings.



  2. ACMZ says:

    Ya! I can see it now, a bumper sticker that takes the entire back bumper. Cool! and then give a number 1-800-GET-RICH.

  3. Toby says:

    Thank you for another excellent piece of writing. I always look forward to checking your website for the latest update.

    Short term bonds are a key part of my portfolio. They provide me with my plan for when the markets decrease in value. Having this plan allows me to sleep well at night. When the market has a mood swing overnight and drops like a lead brick dropped from tall building, I know I can sell some bonds and buy the indexes while they are cheap. This is not what the majority of investors will be doing. They will be selling. When the markets increase again, I will sleep happily knowing that I there at the grand sale and I had money to spend! Yes, bonds are a key part of my portfolio.

    Thank you for the great website Andrew!

  4. What can I say Andrew…..awesome post.

    My wife and I continue to keep a bunch of bonds in the form of XBB. Over time though, because we are very fortunate to have 1 DB and 1 DC pension plan, we'll reduce our exposure to bonds. The pension plans are what I consider a "big bond" and they will stabilize our portfolio.

    I recognize we are very lucky to have these plans, which allows us to take a bit more equity risk for the long haul. I have a post planned to discuss this…I hope you check it out. I've love to hear your thoughts about it.

    All the best my friend,


  5. Alesso says:

    Hi Andrew,

    It's hard not follow you on your investment idea. We are thought not to think like you do but i belive you are right, that's why i'm starting to invest in indexs!

    Thanks for that eye oppening!!


  6. Stanley says:

    Hi Andrew

    I keep an eye on your website. Thanks for your insight. Your making the world a better place.

    I wanted your insight on fidelity index funds. I am using the spartan fund FIBIX. I wanted to know what other funds should I add to the line. Thanks a lot for your guidance.



    • Hi Stanley,

      Those are great funds. If you were roughly my age, you may want to try this:

      45% of your money in the Fidelity Intermediate Bond Index

      30% of your money in the Fidelity U.S. (S&P 500) Stock Index

      25% of your money in the Fidelity International Stock Index



  7. Rob says:

    Hey Andrew,

    Always great advice. I'm curious your thoughts on Robert Wiedemer's prediction of another 'super crash' coming with markets potentially dropping as much as 90%? IS this something you are looking forward to to snatch up cheap stocks? And how would you protect your money already invested from depreciating so drastically?

    THANKS for all the advice!

    • Hi Robert,

      I would love to see something that irrational occur with the stock market. I wouldn't try to "protect" anything. You have seen my portfolio. I would rebalance, which would put me in an attacking position, rather than a defending one. My suggestion is to ignore forecasts. They just get your hopes up–in this case, anyway!



      • Robert says:

        Thanks Andrew. I definitely try to just stick with your advice and ignore predictions. Best case scenario I guess would be if another crash did occur, hope to be a little heavy in the bond index and then go crazy buying up cheap stock index's.

        Thanks again, your posts and your book have completely fixed my spending and saving habits in only one years time!

  8. Daniel Czewski says:

    Hi Andrew,

    I wanted to take a moment to thank you for your book. I’m in the middle of transitioning my investments from actively managed mutual funds into index funds, with an eye on avoiding any delayed service charges for selling funds prior to their maturity dates.

    The only thing I’m feeling iffy about is the annual rebalancing. I think I understand how it benefits the investor, but it seems strange to let the calendar decide when it should happen. I had the idea that maybe I should pay attention to the % allocations and rebalance when those are off more than they should be. So I did a “what if” spreadsheet of TD e-series index funds over the past decade, with a 40% allocation to bonds and the remainder even divided between Canada, US and International. If I trigger a rebalance only when by bond allocation is off by more than 6% (hi or low), or when any stock allocation is off by more than 3%, I see great results.

    Annual rebalancing turns 100,000 into 125,576 in that decade, while triggering based on these percentages turns the same investment into 173,932. (In both cases including dividends). I still have only 9 occasions to rebalance in the decade, but 4 of those are in the fluctuations of 2008 and 2009.


    • Hi Daniel,

      I personally rebalance when my alignment is out by 10% or more. I also buy the lagging index each month, so some kind of rebalancing occurs monthly through purchasing.

      Annual rebalancing does make things easier for most people. You backtested, however, a single short period. In other decades, the annual rebalancing on a specific day of the year could end up with better results. For example, if the markets dropped 10% in August, we can assume you and I would have rebalanced. But if they fell another 30% by December, the person waiting to rebalance on January 1, would have earned higher overall returns. There’s no way of really knowing by backtesting over short (or long) periods. Knowing there’s no magic to it, I hope, will relieve your curiosity rather than add to it. Don’t search for that perfect time. Going forward, you won’t find it.


  9. alan speck says:

    Hi Andrew, thanks for clarifying the prospect of bonds bombing. What if, say, stocks and bonds fell at the same time? Is that a possibility in the near future? I currently hold the Vanguard bonds (VAB). Would you suggest a better bond index? Is this one short term enough? Thanks for your great insights, Alan.

  10. Greg says:

    I understand that bond rates follow mortgage rates relatively closely?

    I am starting to channel some funds into an index portfolio, maybe adding 10k – 15k each 6 months for the next couple of years. I am considering the strategy to hold the bond component of my index protfolio in my mortgage offset account. This will return the equivalent of approx 5% pa in interest savings and at no risk of capital loss (ignoring potential fluctuations in property prices).

    I am currently an expat, but I am planning to return to Australia in the next year or so, so this will all be done within the Aus taxation environment. I am repatriating funds at the moment.

    I have not seen you write anything in regard to investors who also have mortgage, and I am interested in your views. I am thinking holding bonds, or cash in an offset account are effectively the same asset class.

  11. Aaron says:

    Hi Andrew,

    I read your book a few years ago and it really changed my perspective on investing. I am Canadian and thanks to you I am currently investing in TD index funds, just as you outline in your book.

    I am now living in Germany with my wife and I have a question regarding bonds. My spouse recently came into a lump sum of money and she is planning on investing it here in Germany (it’s in Euros and she is a German citizen). I have advised her to purchase a few different ETFs that mirror the DAX, Dow Jones and an INT fund – as well as one German bond index. The thing is, my wife is very risk adverse. She is 30 years old and we have settled on a 60/40 split. My concern is that investing 40% in Euro bonds seems like a bad idea, given that they are yielding next to nothing right now. Some are not even beating inflation. This seems to be the same theme worldwide.

    Here is one example we are looking at:

    Index Facts
    Yield (average/%) 1.25
    Duration (average/years) 5.95
    Modified duration (average/%) 5.88
    Coupon (average/%) 3.21
    Time to maturity (average/years) 6.56
    Convexity (average) 46.39

    There are a few 25 year bond ETFs yielding around 2.67% – I guess my point is I really don’t know which type of bond ETF we should purchase. Or if we should purchase one at all given the current yields.

  12. Sean says:

    Hi Andrew,

    I’m keen to hear your take on a recent suggestion made to me.

    When discussing with an experienced investor about buying a stock ETF and a gov bond ETF and having a ratio of 70:30 stocks:bonds, he suggested that I simply keep the 30% in cash rather than buy a bond ETF. His argument was that bonds earn nothing and in fact cost money when you consider TER and brokerage costs. So, he reasoned, keeping a percentage equal to your age in cash is just as effective, if not more effective, than buying a bond ETF. What do you think?

    And where do you stand on inflation-linked government bond ETFs?

    • Hi Sean,

      I don’t know your nationality, but if you replace bonds with cash, you will make an even lower return over time. In addition, you won’t be able to take advantage of rebalancing. When stocks rise, bonds often fall in price. Cash won’t. You will want to sell stocks (after they have risen) to buy the cheaper bonds when rebalancing. Also, have a look at the following charts. Here’s Canada’s short term government bond index. http://www.blackrock.com/ca/individual/en/products/239491/ishares-canadian-short-term-bond-index-etf In the past five years, $10,000 grew to roughly $11,500. You would have had no such luck with cash. A broader Canadian bond market index would have done even better: turning $10,000 into $12,657 over the past five years. Check out the iShares ticker, XBB.

      If you’re American, and you invested in Vanguard’s broad bond market index five years ago, you would have turned $10,000 into $12,367: http://quotes.morningstar.com/fund/vbmfx/f?t=vbmfx With cash, you would have made nothing.

      If you are British (I’m sorry I don’t know your nationality) you would have turned 10,000 pounds into roughly 12,600 pounds in the past five years with the iShares UK government ETF. http://www.ishares.com/uk/individual/en/products/251806/ishares-uk-gilts-ucits-etf Again, with cash, you would have made nothing.

      As for inflation-linked government bond ETFs, they are excellent products.


      • Richard says:


        Yes, that’s the advantage of bonds. However, cash has its own role, especially as private investors. For instance, your comment that over the last five years you would have made “nothing” in cash is flat wrong. Even in these straightened times has been possible to get 2-3% per annum on cash on relatively large sums of cash as a private investor, albeit with a fair bit of hassle. Furthermore if you’re an institution government bonds are safer than cash, whereas as a private investor your cash is fully protected via the FCSS in the UK. This is another huge advantage.

        Also your comment “If you replace bonds with cash, you will make an even lower return over time” should read you *may* make even lower returns over time.

        It’s true that over the past history, returns from bonds have been higher than for cash for institutions. However this is not so clear cut with private investors, and in addition nothing is certain enough for “will”, particularly given the very low starting yields on bonds. I’d say it is entirely possible cash will beat bonds for at least a couple of years once interest rates start rising, though we’ve all been waiting for that for a long time of course! 🙂

        Finally, you should look at cash from a timeless perspective, not just from the POV of this very low yield environment of the past five years, in which interest rates have hit 300 year lows and bonds have risen to levels that were not really thought possible by conventional economic thinking of the past 100 years or so. (E.g. Negative interest rates briefly on German 10-year government bonds etc). In the first decade of the 2000s, private investors could easily get 5%+ on six-figure cash sums, which compared very well with both equities and bonds.

  13. AJ says:

    Andrew – thank you for the extremely informative information. As many others, I’ve started to follow your philosophy for investing, trying to keep my stock index ETF’s well balanced against my fixed income ETF’s. Also got rid of my mutual funds that were actively managed to lower management fees I was paying.

    Something I’ve not been able to get a good grasp on is how one would classify a real-estate investment into all this. I have since many years back a condo unit which I rent out and currently get a pretty decent annual return. The current MV of the unit is about 40% of my total assets. The question is; as I try to keep my asset allocation to 65% stocks and 35% fixed income (based on my age), should I consider the condo unit as fixed income, stock, or keep it completely on the side and ignore when rebalancing my other assets?

    I’m leaning towards including it as part of my stock allocation as the price fluctuates heavily like a stock (Dubai condo!) and the rent acts like a dividend which again fluctuates based on market conditions and isn’t guaranteed (e.g. if I have no tenant). Bear market = lower price and lower income.

    I feel that if I just keep the condo on the side and not considering it when rebalancing my other assets, that would mean that I may take on too much risk with 65% in stock ETF’s and a condo unit which in my view is a high risk investment just like stocks.

    Thanks in advance for sharing your thoughts on this!

    • Hi AJ,

      You could just keep things simple. Ignore its allocation. Treat your stock and bond market investments as you would without the condo. Rebalance and buy accordingly. The condo just diversifies your holdings.

  14. Sean says:

    Hi Andrew, thanks for the detailed responses — they’re really helpful.
    My nationality from a currency point of view is European – a sadly under-represented cohort on this website.

    I’m just wondering what your take is on short-term European government bonds constructed of Eurozone countries. One slight concern I have is that the whole reason that short-term government bonds are seen as safe is that a government can print money to pay them back (but then you’ve inflation). With European bonds, Eurozone governments actually cannot print money. That said, I don’t think that Germany, France, Spain, Italy, Ireland, Belgium, Holland et al. will default on their commitments. If they didn’t in 2008, they probably won’t any time in the future.

    What do you think?

    • Sean,

      The short term bonds are not considered safe because governments can print money. They are considered safe because they renew their holdings as they expire on a very regular basis and they are backed by diversified bunches of first world governments. Let’s assume inflation rises to 10% next year. If you own a bond (it’s easy to explain with an isolated bond) paying 4%, then you will lose to inflation. But if you own a short term bond index, comprising 1-3 year bonds, then the bonds expiring (the ones paying 4%, let’s assume) will be replaced by bonds paying 11% or more, because interest rates would have risen with inflation. Long term, a short term government bond index will always outpace inflation, no matter what inflation does.

  15. David says:

    Hi Andrew, Sean

    Another European here – UK citizen but living in Switzerland for the long term.

    I have a bit of spare cash at the moment (lucky me) and was also pondering a cash holding as part of the portfolio, but with bank interest rates so low it seems a waste of the cash that could be working harder in an ETF.

    I have a couple of boring but reliable Swiss Govt bond ETFs in my portfolio : CSBGC3 and CSBGC7, but these are distributing ETFs.

    Do you know of any Europe based (Euro, GBP or CHF denominated) accumulating bond ETFs that physically replicate the bond market. There are some ‘synthetic’ ones but I am wary.

    Any ideas?

    • Sean says:

      Hi David,

      I am also looking for such a bond, albeit a more diversified one. I found one by SPFR here: GY

      iShares also have such bonds on offer. Go to their UK website and look at their range of bonds.

      Hope that helps…

  16. David says:

    Hi Sean,

    I like the low TER of SYB3, but it is a distributing etf. I found these accumulating ones:

    IE00B0M62X26, iShares Euro Inflation Linked Government Bond. TER 0.25%. Seems a bit expensive. Fully replicated though.
    A possibility.

    LU0444607187, ComStage ETF iBoxx EUR Sov. Infl.-Link. Euro-InflA possibility. 017%, synthetic, small size.
    Not sure about a small synthetic fund…

    Any thoughts?


  17. Shane says:

    Hi Andrew,

    I’d like to draw your attention to two current Bogleheads discussions about bonds and whether people are better off out of them and into cash right now:



    A key point is that when a bond ETF’s yield to maturity is lower than 1, it’s time to hold cash, not bonds. They further argue that it makes no sense for Europeans to hold European bonds at this time. My question to you is, what do you make of this argument? Is looking at a bond ETFs yield to maturity something similar to looking at a stock ETF’s P/E ratio – i.e. an exercise in market timing and nothing more?

  18. Tim says:


    Assuming that I am happy with a traditional asset allocation of 60% equities and 40% bonds for the foreseeable future, are there actually any advantages in owning seperate equity and bond index funds over the Vanguard Lifestrategy 60% Equity Fund? Also, are Vanguard Lifestrategy funds always automatically rebalanced to the exact required allocation at any given time?

    Forgive my ignorance, but this range of funds appears to be “too good to be true”, and I just want to make sure I’m not missing some drawback before diving in. I live in the United Kingdom, by the way. Thanks.

  19. Denis says:

    Hi Andrew,
    I have a decent amount of cash I’d like to invest.
    I already bought the stock ETFs and now I’m at the point I should buy bonds, but looking at current quotation they seem worse than cash! expensive and yelding almost nothing. (I’m Italian living in the UK).
    A cash fund can provide approx 1.5% do you still suggest to buy IBGS or I may be better staing short term with the cash?


    • Denis,

      It sounds like you are speculating. Build your portfolio properly and close your eyes and ears. Then keep adding money to it every month or quarter. Then, when you retire, start to withdraw about 4% of its value every year. No speculating.


  20. Barry says:

    Any thoughts on Floating Rate Bonds?

    ETF provider BetaShares is this week launching a strikingly similar product called the Australian Bank Senior Floating-Rate Bond ETF (ASX code: QPON) that could presage a revolution in fixed-income investing.

    • toony says:

      I had a quick look at them – you are much better off sticking with a vanilla Gov bond fund like VGB.
      A major role of bonds in a portfolio is NOT to generate returns but reduce volatility and support portfolio in bear markets. You want this component to be risk free if possible – hence using semi-gov/gov bonds is recommended (all the portfolio in Andrew’s book uses Gov bonds)
      The QPON look a lot more like a structured note than bond – structured product ALWAYS benefit the seller/issuer, rarely the buyers (the returns are much lower than the risk you undertake for owning them).
      QPON pays 2.65% after management fees (2.5% if including brokerage). Now VGB is ~0 risk with dividend currently ~2.5% (before brokerage).
      I just did a quick check with St.George bank – term deposits are guaranteed by Aus Gov (up to 250k per account I believe) so ~0 risk as well. $1000 for 12 months gets you 2.55% (no brokerage needed) and if you want 5 years, they are paying 2.90% (again no brokerage fees)!
      When adjusted for volatility/risk/duration/fees etc, I have yet to see anything better than a vanilla Gov bond fund like VGB 🙂
      *disclosure – I (only) own VGB in my portfolio and have an account with St.George but not affiliated with either companies

  21. Barry says:

    Thanks Toony

    I have VGB also but over recent times have been adding VAF since it was introduced. I watch the new developments with interest but have stuck to the plain vanilla funds as advocated by Andrew

  22. Dennis says:

    Hi Andrew, hope you’re well. Just wondering what you think about rising g7 government debt and its impact on a global government bond etf?

    • Hi Dennis,

      I never think about that sort of thing. I just invest in a low-cost diversified portfolio of index funds. I rebalance once a year. I add fresh money when I have it. That’s it. Thinking of this sort of thing tends to be counter-productive to building wealth over time.


  23. Frank says:

    Hello Andrew,

    I just wanted to ask your opinion on the following new vanguard funds
    These products seems very appealing.


    Vanguard Conservative ETF Portfolio Seeks to provide a combination of income and moderate long-term capital growth. VCNS 40% equity/60% fixed income

    Vanguard Balanced ETF Portfolio Seeks to provide long-term capital growth with a moderate level of income.
    VBAL 60% equity/40% fixed income

    Vanguard Growth ETF Portfolio Seeks to provide long-term capital growth.
    VGRO 80% equity/20% fixed income

    These funds will be balanced automatically.

    MER: .22%



  24. Matthew Gill says:

    Andrew, I am a British expat but long-term resident in Dubai (since ’94) with a Jordanian wife. We have no plans to return to the UK and are potentially retiring within a couple of years to Portugal under the NHR if that survives Brexit etc. In your first edition you made recommendations on global nomad type portfolios, but I was looking for options for global Short-term Bond ETFs. I am currently invested in dollars in CORP (which has an effective duration of 6.5 years which I assume is the average tenor), SHYU (2-15 years – a higher dividend bond ETF) and with sterling I held in IGLS (1-5 years average 2.4 years). Further investments will be in US$ into Internaxx and all the above ETFs are domiciled in Ireland as you recommend. Do you have other short-term bond ETF suggestions? I was at the Dubai meeting, but you only had a short Q&A and there were a lot of interested participants. Regards

  25. Index says:

    Hi Andrew,
    I am bit concerned about my bond allocation so would welcome your thoughts.
    I am a 47 year old Brit resident in UAE following global nomad couch potato.
    I have 35% of my portfolio allocated to bonds – 20% is in IGLO and 15% is in CORP.
    Is this OK? Any improvements I can consider?

    • Michael Martin says:

      Hello Index, Why did you choose IGLO over IGIL ? I know that Andrew recommends IGIL in his book, but I do not understand how both work. I would also like to hear about Andrew regarding that aspect.

      • Hi Michael,

        The choice of one ETF over another doesn’t interest me much. It’s like debating about the brand of sugar you’re using in your cake’s icing. Make sure your portfolio is diversified, low cost, and that you rebalance once a year. Oh, and save money like crazy! 🙂 Those are the much more important factors.


  26. Index says:

    Hi Michael, I don’t think IGIL was available when I set up my portfolio some time ago, so back then I chose IGLO for the reason that it offered broad exposure to high quality developed world government bonds. I also use CORP as part of my bond strategy – this provides exposure to high quality global corporate debt – in order to diversify. I think you could now use a single ETF to achieve the same objectives, e.g AGGG, but that wasn’t available when I started out – I am considering consolidating under AGGG but I don’t think there’s much difference whether I use IGLO plus CORP, or AGGG. Andrew – any thoughts? Index

    • Splitting hairs…two or three times over.

      Such questions aren’t very relevant to the big picture. There will always be plenty of bond ETFs. Nobody’s retirement will live or die based on the wrong government or investment grade bond index fund selection. And nobody can know which will do best ahead of time. Either way, there’s going to be a laughingly slim long-term margin between the best and the worst, even if you had that working crystal ball.


  27. Dennis says:

    Hi Andrew thanks for keeping this valuable site going.

    I’ve followed your advice and bought iglo etf. However a look at the public debt to GDP for the G7 is worrying at 100%+ (as per the resource below) and was wondering if I perhaps should be looking at other options. I was thinking of purchasing gov bonds of advanced economies but with lower, much more manageable levels of public debt to gdp eg switzerland, Luxembourg, Australia etc.


    Would be great to hear your thoughts.

  28. Chris with a K says:

    My Italian dilemma

    Dear Andrew,
    I hope this message finds you well (after all, the article is already quite old, but still very relevant IMHO).

    I am a European expat in Southeast Asia and have built a portfolio based on the principles you recommend. My only bond ETF (25% of my portfolio) is iShares € Govt Bond 3-7yr UCITS ETF (CBE7), but due to the high weighting of Italian gov’t bonds this ETF took “quite a hit” (in bond market proportions) in recent weeks.

    Italian debt was downgraded and is only one grade away of getting rated as non-investment grade, which (as I heard) might even lead to a dismissal of Italian gov’t bonds from the Barclays Index that this ETF tracks.

    I know that I should not follow news and base investment decisions on it – but the Italian government is pulling one stunt after another, and again Italian debt (and the future of the whole currency union) is in question.

    Long story short: would you recommend diversifying into US-treasury-bond-ETFs in USD denomination to pursue a split between Europe (Euro) and US (USD) government bond holdings in my portfolio (e.g. each 12.5%)?

    And, related: do you know what would happen in case Italy’s credit would be downgraded to non-investment grade? (I suppose the ETF would have to replace the Italian bonds with something else, and sell them at the worst time. I also know that one should buy “when blood is in the streets” – but I imagine this scenario rather like a REAL bloodbath for this bond ETF …)

    Thanks a lot for your always inspiring articles and comments. In case you will be in Bangkok for a speaking date anytime soon, I am sure to attend, and I might even treat you for a dinner (50 Baht or so… you know… saving…)!

    Best regards and safe travels,

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