The Gleason Report: Historical Performance of the Bond Market Timing Model




Here are the facts.

Below is a list of the buy and sell dates of the Gleason Report's Bond Market Timing Model. The model beats buy and hold over all time periods and avoids all bond market crashes and severe downturns.

All trades prior to 1999 are calculated on historical data. From 1999 to year-end 2008, all results are real-time and verified. When out of the market the model is assumed to have earned 5% interest in cash.

The TGR Bond model identifies periods when interest rates on treasury bonds are likely to rise and fall. This is very important because bonds do best in periods of falling interest rates. Falling rates means that existing bonds go up in value because their interest payments are fixed at the older, higher rate. As rates fall, you get the fixed interest plus the capital gain.

Periods of rising rates can be devastating to bond holders if rates rise quickly. That's because rising rates reduce the value of existing bonds since newer bonds pay a higher rate. You still get the fixed interest rate as rates rise but your bond's value declines. The capital loss can exceed the interest rate payments!

The graphic below shows how the TGR bond model always buys bonds as rates are falling. It is out of bonds as rates rise.



The table below shows the buy and sell dates. The model always produces capital gains in addition to the interest over the holding period between the buy and the sell. In every case except 1/2004 to 11/2008 owning bonds when the model was out of the market produced a capital loss. Capital losses occur when interest rates go up while you own bonds.

The model avoids periods of rising rates. When rates rise, you still got the interest on the bond but you must subtract the yearly capital loss to get the true return for those years.


  Month End Month End
Action Date Bond Rate
BUY 1/1970 7.75
SELL 3/1972 6.12
BUY 7/1975 8.20
SELL 4/1977 7.45
BUY 1/1981 12.68
SELL 11/1982 10.79
BUY 7/1983 11.76
SELL 10/1986 7.34
BUY 3/1988 8.57
SELL 8/1993 5.45
BUY 12/1994 7.83
SELL 1/2004 4.14
BUY 11/2008 2.96
SELL 3/2009 2.58

Note: TGR choose not to buy government bonds in 11/2008 because rates were too low. Instead we bought medium term corporates with a duration of 5 years. The subsequent sale in March 2009 netted 0% return whereas if I had followed the model exactly the return would have been much better. This is a case where I should have listened to my model rather than assume government rates couldn't possibly go lower than 2.96%!