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The current trend and future prognosis for long-term US treasury bonds is for increasing yields. The incoming administration will be seeking more funding for new programs. All of that new funding is making bond buyers nervous which is driving up the yields. Those 4% 20-year Treasury yields from as recent as September are now over 4.8%. As new yields go higher, the value of older lower yield bond (i.e. TLT holdings) go lower. Given that HPYT's largest holding is TLT, there is potential for the ETF price to drop even further until the long-term bond market flattens out.
Rates increase -> bond values drop so the yield can match the government overnight rate Rates decrease -> bond values increase so the lower yield can match the government overnight rate Like you said, equities are not as closely corelated, but do face pressure during high interest rate periods because the risk-free return (savings account) becomes higher and the yields generally increase in the market to account for the risk required to hold equities and then the return that an investor wants to continue holding. I think the problem with HPYT (I don't have a position) is that Harvest can write up to 100% Covered Calls on the portfolio. Little to no upside on the position causes the value of the fund to have to take the stairs up and the elevator down whenever there is corresponding market pressure, so to speak.
I'd like to see Harvest post their actual covered call positions instead of just saying it's proprietary. With HPYT they can sell up to 100% of their long positions but only Harvest knows what it actually is. EVOLVE ETFs on the other hand post their holdings daily. BOND for example. Knowing the actual holdings would allow me to determine if the ETF is worth buying.
This one is not a “back up the truck” kind of etf in my opinion. However,if one wants to have a small position for income it’s probably ok. Just understand that your capital is likely to just go down over time.
I personally am going to be putting money into bonds and cash as opposed to equities this year. I'm currently all in on equities and just want to diversify. I'll probably go 80/20 if not 75/25.
Bonds to me are an insurance policy, to counter equity volatility. Before dismissing bonds entirely, I can recall during the 80’s when Canada Savings Bonds were paying 19 1/2%. As a retiree, I keep 20% in short term bonds, but have no interest in covered call bonds.
I opened a small position at $10.25, as a retiree it's a nice yield booster. In this case I don't care about the bond market or appreciation, it's purely income.
I got into HYPT because the expectation was rates would be flat to down for the next few years. In the meantime I would collect a great yield. 1 year later I have collected the great yield but long term rates have gone up and my principal has eroded to almost the same amount as the distributions that I have received. Going forward, if long term rates do go down, I’m not sure how much capital appreciation I will recover given Harvest can write CC on up to 100% of the portfolio thus reducing or eliminating any potential gains. I feel like such a schmuck.
I am in a similar position. However, I was previously in a worse position with ZPR and ZRR. The difference is, with the latter, I was getting 4-6% yield and now! I’m getting 16%. Therefore, I’m much less likely to sell as long as the cashflow is rolling in. This is, in my view a benefit to high income funds.
Thanks for the video. I bought HBND in August HBND is down 10.70% for me and I bought HPYT in October and it’s down 4.80% I thought HBND would perform better because they only write on 50% but pay less yield but it seems HBND has not performed any better I hold one of each in two separate accounts.
was looking at this for my retired father to park some cash however as juicey as the yield is, the stock price going down so much seems to cancel the value of it. maybe an index based etf with covered calls would be more suitable for him but now the concern is buying the top of the market...
Todays highs are tomorrows lows. I know the feeling, but you give up time in the market and I’m sure you’ve heard the stats of time missing out on the 5 best trading days of the year. Most of your return is locked up in those days.
Thanks for the deep dive. I own too much and not happy but hoping for something good in the new year. Happy holidays to you and the family from Thailand
No problem, I think there are some pretty good responses in here related to the subject of bonds. Hopefully people read. Enjoy the holidays, merry Christmas 🎄
I dont trust them not lowering the HPYT div % payout. HBIL has dropped 3 times, 3 months in a row. I know it's not the same thing, but it's still a piss off.
I just checked the lifetime distribution cuts that Harvest has made across all of its ETF’s. HPF (energy fund) has a lifetime distribution cut of around 57% since inception. Every other fund is either stable or has grown. Time will tell with HPYT, but the record shows these guys don’t particularly like cuts. They’re reputation is based on stable income.
Adriano from Passive Income Investing did an interview with Michael Kovacs from Harvest about a month ago. He explains everything very well. I would not worry about about a cut.
I don’t really see the value in picking up these CC ETFs if the NAV drops that significantly when you can just pick up a BMAX or HDIF HRIF and get about 10% yield with a flat and rising NAV and keeping up to the average gains of indexes. Interest rates have been a failed manipulation experiment for so long now. Hard to bet on them. Just buy more of the steady Eddie as you sometimes refer to it.
I don’t mind some exposure to fixed income if it’s mixed much more heavily with equities. BMAX is outlier kind of fund the way it’s set up. One of its underlying holdings invests in volitility similar to SVOL. Lots of solid asset class diversification with BMAX, yield is over 10% “usually.” Definitely up my ally.
I personally prefer TLTW due to its focus on l9ng term bonds. These bonds are generally more sensitive and volatile to interest rate changes. The volatility may be good or bad based on one's tolerance or investment preferences. I like TLTW becuase it's just one segment US treasury and focus on long term which makes life easier and stable yield, safe and I can hold for long term and make strategic investments when I'm comfortable and not worry too much about the details. I don't invest too much in TLTW 9r bonds so its a good diversifier. So in worst phases if TLTW falls in price or yields go low I'll not be s9 concerned given opportunities elsewhere. Just my view, please so your own research.
Go wear your tin foil hat. The rest of us who understands how the world works - will continue to trust the most powerful corporation in the world (the USA government)
It's directly impacted by us fed interest rate movements and the forecast of the changes. If thw US feds now think that trumps tariffs everyone policy comes true, this will reintroduce inflation and force possible rate increases. This lowers hoyt because of thw long term bond.
I believe modified duration refers to the sensitivity of the fund to interest rate changes. For example, a bond with a duration of 5 is expected to increase by 5% from a 1% decrease in interest rates.
Perhaps I’m confused but at the 3:40 mark you comment that due to the CAD declining people are happy that the fund was hedged. At the 5:00 minute mark you say that if CAD starts doing better people would want the unhedged version. Don’t you have that backwards? If CAD declines in an unhedged ETF I get the benefit of conversion of USD to a lower CAD. I wish the unhedged was available when I bought which would have mitigated the dropping unit price I have experienced.
If the net asset value of the fund is low enough then there is a chance it can get cut. 20% yield doesn’t neccessarily mean it’ll get cut. It’s distribution has been remarkably consistent despite its price decline.
TO ACCESS THE COVERED CALL ETF ALLSTAR TRACKER
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1 On 1 Mentorship Class
Calendly.com/coveredcalletfinvesting/mentorship-one-on-one
The current trend and future prognosis for long-term US treasury bonds is for increasing yields. The incoming administration will be seeking more funding for new programs. All of that new funding is making bond buyers nervous which is driving up the yields. Those 4% 20-year Treasury yields from as recent as September are now over 4.8%. As new yields go higher, the value of older lower yield bond (i.e. TLT holdings) go lower. Given that HPYT's largest holding is TLT, there is potential for the ETF price to drop even further until the long-term bond market flattens out.
Great explanation, thanks for posting this. Hopefully more people read it.
We will be in a lower interest rate environment eventually. Right now I'm happy purchasing HPYT at 17 plus yield.
Rates increase -> bond values drop so the yield can match the government overnight rate
Rates decrease -> bond values increase so the lower yield can match the government overnight rate
Like you said, equities are not as closely corelated, but do face pressure during high interest rate periods because the risk-free return (savings account) becomes higher and the yields generally increase in the market to account for the risk required to hold equities and then the return that an investor wants to continue holding.
I think the problem with HPYT (I don't have a position) is that Harvest can write up to 100% Covered Calls on the portfolio. Little to no upside on the position causes the value of the fund to have to take the stairs up and the elevator down whenever there is corresponding market pressure, so to speak.
Awesome response, I enjoyed reading your elaboration on the topic. That’s why you got a few 👍🏻.
I'd like to see Harvest post their actual covered call positions instead of just saying it's proprietary. With HPYT they can sell up to 100% of their long positions but only Harvest knows what it actually is. EVOLVE ETFs on the other hand post their holdings daily. BOND for example. Knowing the actual holdings would allow me to determine if the ETF is worth buying.
Valid point 🤌🏻
I got busted twice for holding this fund because I thought it was safe to have bond fund in the portfolio.
This one is not a “back up the truck” kind of etf in my opinion. However,if one wants to have a small position for income it’s probably ok. Just understand that your capital is likely to just go down over time.
I personally am going to be putting money into bonds and cash as opposed to equities this year. I'm currently all in on equities and just want to diversify. I'll probably go 80/20 if not 75/25.
Into HPYT specifically? The question now is has it hit its near bottom.
@@CoveredCallETFInvesting I'll spread it out and put some in HPYT and some in either/and BOND, HBND, LPAY, HPYM
Bonds to me are an insurance policy, to counter equity volatility. Before dismissing bonds entirely, I can recall during the 80’s when Canada Savings Bonds were paying 19 1/2%. As a retiree, I keep 20% in short term bonds, but have no interest in covered call bonds.
I opened a small position at $10.25, as a retiree it's a nice yield booster. In this case I don't care about the bond market or appreciation, it's purely income.
17% nice will sell when I break even in the meantime just dripping
I got into HYPT because the expectation was rates would be flat to down for the next few years. In the meantime I would collect a great yield. 1 year later I have collected the great yield but long term rates have gone up and my principal has eroded to almost the same amount as the distributions that I have received. Going forward, if long term rates do go down, I’m not sure how much capital appreciation I will recover given Harvest can write CC on up to 100% of the portfolio thus reducing or eliminating any potential gains. I feel like such a schmuck.
I am in a similar position. However, I was previously in a worse position with ZPR and ZRR. The difference is, with the latter, I was getting 4-6% yield and now! I’m getting 16%. Therefore, I’m much less likely to sell as long as the cashflow is rolling in. This is, in my view a benefit to high income funds.
Thanks for the video. I bought HBND in August HBND is down 10.70% for me and I bought HPYT in October and it’s down 4.80% I thought HBND would perform better because they only write on 50% but pay less yield but it seems HBND has not performed any better I hold one of each in two separate accounts.
MPAY value looks much more stable, and at 9%. Toronto exchange.
was looking at this for my retired father to park some cash however as juicey as the yield is, the stock price going down so much seems to cancel the value of it. maybe an index based etf with covered calls would be more suitable for him but now the concern is buying the top of the market...
Todays highs are tomorrows lows. I know the feeling, but you give up time in the market and I’m sure you’ve heard the stats of time missing out on the 5 best trading days of the year. Most of your return is locked up in those days.
Great video thank you. Lpay outperformed due to FX as it is USD exposure is unhedged (take a look its USD version).
could you do a video om BTCI and YBTC
Thanks for the deep dive. I own too much and not happy but hoping for something good in the new year. Happy holidays to you and the family from Thailand
No problem, I think there are some pretty good responses in here related to the subject of bonds. Hopefully people read. Enjoy the holidays, merry Christmas 🎄
I dont trust them not lowering the HPYT div % payout. HBIL has dropped 3 times, 3 months in a row. I know it's not the same thing, but it's still a piss off.
I just checked the lifetime distribution cuts that Harvest has made across all of its ETF’s. HPF (energy fund) has a lifetime distribution cut of around 57% since inception. Every other fund is either stable or has grown. Time will tell with HPYT, but the record shows these guys don’t particularly like cuts. They’re reputation is based on stable income.
Adriano from Passive Income Investing did an interview with Michael Kovacs from Harvest about a month ago. He explains everything very well. I would not worry about about a cut.
@@jumbothompson I reference that video in mine as a source for people to hear straight from the guy who oversees Harvest products.
@@CoveredCallETFInvesting
Yup. But not everyone watches and listens. They just panic in the comments section.
I don’t really see the value in picking up these CC ETFs if the NAV drops that significantly when you can just pick up a BMAX or HDIF HRIF and get about 10% yield with a flat and rising NAV and keeping up to the average gains of indexes. Interest rates have been a failed manipulation experiment for so long now. Hard to bet on them. Just buy more of the steady Eddie as you sometimes refer to it.
I don’t mind some exposure to fixed income if it’s mixed much more heavily with equities. BMAX is outlier kind of fund the way it’s set up. One of its underlying holdings invests in volitility similar to SVOL. Lots of solid asset class diversification with BMAX, yield is over 10% “usually.” Definitely up my ally.
I personally prefer TLTW due to its focus on l9ng term bonds. These bonds are generally more sensitive and volatile to interest rate changes. The volatility may be good or bad based on one's tolerance or investment preferences. I like TLTW becuase it's just one segment US treasury and focus on long term which makes life easier and stable yield, safe and I can hold for long term and make strategic investments when I'm comfortable and not worry too much about the details. I don't invest too much in TLTW 9r bonds so its a good diversifier. So in worst phases if TLTW falls in price or yields go low I'll not be s9 concerned given opportunities elsewhere. Just my view, please so your own research.
The full faith and credit of US gov lol I have no faith in them and they're almost out of credit
Yeah, you’re not the only one with the same sentiment. “All out of credit.” Haha, good line.
Go wear your tin foil hat. The rest of us who understands how the world works - will continue to trust the most powerful corporation in the world (the USA government)
It's directly impacted by us fed interest rate movements and the forecast of the changes. If thw US feds now think that trumps tariffs everyone policy comes true, this will reintroduce inflation and force possible rate increases. This lowers hoyt because of thw long term bond.
I believe modified duration refers to the sensitivity of the fund to interest rate changes. For example, a bond with a duration of 5 is expected to increase by 5% from a 1% decrease in interest rates.
Perhaps I’m confused but at the 3:40 mark you comment that due to the CAD declining people are happy that the fund was hedged. At the 5:00 minute mark you say that if CAD starts doing better people would want the unhedged version.
Don’t you have that backwards? If CAD declines in an unhedged ETF I get the benefit of conversion of USD to a lower CAD. I wish the unhedged was available when I bought which would have mitigated the dropping unit price I have experienced.
Is there risk of the distribution being cut if it gets closer to 20% yield?
If the net asset value of the fund is low enough then there is a chance it can get cut. 20% yield doesn’t neccessarily mean it’ll get cut. It’s distribution has been remarkably consistent despite its price decline.
They're paying out only 75% of what they're making every month to ensure they never have to cut. Please read the offer document and fund details.
@@CoveredCallETFInvestingthanks and love the videos. Very informative. It’s a new issue so we’ll see how it weathers this early storm.
@@ananditagangwar9988thanks and will do.
bought 500,would buy 500 more and im capping it there.