The bond market selloff has many investors licking their wounds, but it could also be a good time to take your losses as a tax advantage.
With the 10-year treasury yield seeing a massive single-day spike on Wednesday, hitting its highest level since 2007, and bond prices continuing to fall, investors who bought bond mutual funds or ETFs when yields were lower may be sitting on unrealized losses within their portfolio. Investors often wait until December to tax-loss harvest — or sell investments at a loss and use their losses to offset gains in other investments. But you don’t have to wait. The very thing hurting your bond ETF today — higher yields — can potentially give you both a tax asset and an opportunity to reinvest at a higher yield.
The recent selloff has given many investors an opportunity for tax-loss harvesting. Consider for instance, that the Vanguard Total Bond Market Index Fund ETF (BND) and the iShares Core U.S. Aggregate Bond ETF (AGG) are both down more than 3.5% year to date.
“It’s an opportunity to strike while the iron’s hot because there’s no guarantee that these losses are going to stick around,” said Conor Kelly, a partner and senior financial advisor with Prime Capital Financial in Overland Park, Kansas. “You don’t want to wait until year-end because these losses could disappear or at least shrink.”
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