Approaching the Zero Bound - Bonds

As bonds approach the artificial zero bound, where do we go next especially after the record setting +30% in 2011?  The rolling 250-day total return has rarely gone negative since the inception of the Vanguard Funds VBMFX and VUSTX.  I am intentionally an ex-bond fund manager, so I am very interested.

From TimelyPortfolio

From TimelyPortfolio

R code in GIST:

	require(latticeExtra)
	require(directlabels)
	require(reshape2)
	require(quantmod)
	getSymbols("VUSTX",from="1990-01-01")
	getSymbols("VBMFX",from="1990-01-01")
	bonds.tr <- merge(ROC(VUSTX[,6],250),ROC(VBMFX[,6],250))
	colnames(bonds.tr) <- c("VanguardLongTsy","VanguardTotBnd")
	bonds.melt <- melt(as.data.frame(cbind(as.Date(index(bonds.tr)),coredata(bonds.tr))),id.vars=1)
	colnames(bonds.melt) <- c("date","fund","totret250")
	bonds.melt$date <- as.Date(bonds.melt$date)
	asTheEconomist(
	horizonplot(totret250~date|fund,origin=0,horizonscale=0.05,
	data=bonds.melt,
	strip=TRUE,strip.left=FALSE,par.strip.text=list(cex=1.1),
	layout=c(1,2),
	main="Vanguard Bond Funds 250 Day Total Return"))
	direct.label(
	xyplot(bonds.tr,screens=1,
	ylim=c(-0.35,0.35),scales=list(y=list(rot=0)),
	col=theEconomist.theme()$superpose.line$col,
	par.settings=theEconomist.theme(box="transparent"),
	lattice.options=theEconomist.opts(),
	xlab=NULL,
	main="Vanguard Bond Funds 250 Day Total Return"),
	list("last.points",hjust=1,cex=1.2))

view raw bonds zero bound.r hosted with ❤ by GitHub