Q: I note you last comment on ZRR (BMO Real Return Bond Index ETF) was in 2022. I note it has declined from the $19 range about a year ago down to $14 currently. What are your thoughts on it today as a place to invest for dividend income (RBC shows a dividend of 6.83%). I am interested in it for income as I am retired. How safe is the dividend and what will cause the price to appreciate again?
5i Research Answer:
Indicated yield is now 6.87%. Five year return is now negative, at -0.64%. Unfortunately, it may have missed the inflation bump, being positioned at the wrong end of the curve when inflation spiked over the past 16 months. Its duration now is 13.5 years, so should have leverage for a recovery if inflation pops again. But, that is seeming less and less likely in the medium term. Thus, we would prefer a more diverse bond fund such as XBB. Indicated yield is lower (3.17%) but it should perform better if rates decline.