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iShares 1-5 Year Laddered Corporate Bond Index ETF (CBO)
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iShares 1-5 Year Laddered Government Bond Index ETF (CLF)
Q: Hi- retired investor.
Bought these a while back for fixed income and am down 8% and 10% respectively. Could you explain why these have decreased while bond yields have increased?
Should I dump these and just convert to a 5% GIC or is there a light in view?
Thanks
Jeff
Bought these a while back for fixed income and am down 8% and 10% respectively. Could you explain why these have decreased while bond yields have increased?
Should I dump these and just convert to a 5% GIC or is there a light in view?
Thanks
Jeff
5i Research Answer:
When yields rise, EXISTING bond prices go down. Both of these are laddered bond funds, and own bonds with maturities of 1 to 5 years. So, when rates rose, the longer term bonds they own would have declined in price, sometimes sharply. As rates peak and/or fall, performance should improve. We would be fine holding these now that the rate hike cycle appears ending. Note that bonds can of course increase in value, unlike a GIC. We have nothing against GICs currently but it is a different product.