Bond Selloff Opens Tax-Loss Harvesting Window — SkimNews
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- The 10-year Treasury yield has climbed to roughly 5%, pushing bond ETF and mutual fund prices down and leaving many investors sitting on unrealized losses that American Century's Joseph Gotelli and Jason Greenblath say can be harvested now instead of waiting for year-end.
- Vanguard Total Bond Market ETF (BND) and iShares Core U.S. Aggregate Bond ETF (AGG) are each down more than 3.5% year to date, positioning them as prime tax-loss harvesting candidates, per the article.
- The S&P 500 is up about 13% year to date, making equity-based harvesting "just about impossible to find" according to Vanguard — NewSpring Wealth's Kristin Larson said the bond side of portfolios is "the only side that's down right now" for many clients.
- The IRS wash-sale rule disallows a deduction if a substantially identical security is bought within a 61-day window (30 days before or after the sale), which Prime Capital's Conor Kelly said is easier to navigate in bonds than in volatile stocks because sitting in cash for 30 days carries less risk.
- Mitch Schlesinger of Evermay Wealth Management warned the harvesting window could close quickly: even with the Fed signaling more hikes ahead, longer-term yields are market-set and could fall if investors expect economic slowdown, causing bond prices to recover.
- Lot-level cost basis analysis is critical, Wealthspire's Bill Schwartz said, because specific tax lots within one fund can show losses even when the overall position shows a gain — advisors recommend examining individual purchase lots rather than headline fund returns.
Why it matters: Investors who postpone harvesting until December risk watching their bond losses shrink or vanish, and with stocks up ~13% YTD, the bond sleeve is often the only venue for any tax-loss harvesting at all. The 61-day wash-sale window forces an immediate decision: substitute into a different fund or sit in cash for 30 days, with advisors saying that's a manageable trade-off in fixed income.
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