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iShares Core Canadian Short Term Bond Index ETF (XSB)
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iShares Core Canadian Long Term Bond Index ETF (XLB)
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Vanguard Canadian Aggregate Bond Index ETF (VAB)
Many experts are suggesting that Bonds are very attractive right now because of the high yields.
Can you please suggest some Canadian bond ETF's and Mutual Funds that one might want to do further research on. In your opinion what duration range represents a sweet spot that might offer attractive total return within 3 years.
In general, we tend to prefer aggregate bond ETFs such as VAB for diversification and bond exposure. These are bond ETFs which have diversification across maturities, bond types (government, corporate, etc.), and credit quality. Aggregate bond ETFs are also great for protecting capital when rates are rising rapidly (as short-term bonds will have less price sensitivity) and will see more capital appreciation when rates drop rapidly (long-term bonds increase more when rates decline).
On the other hand, a more strategic approach would be splitting capital between different duration levels. We like a barbell approach between long-term bonds (XLB) and short-term bonds (XSB) for this strategy. Given that yields have continued to rise, short-term duration bonds benefit relative to long-term bonds as their yields increase and their prices do not decline as much as XLB. On the other hand, if yields are to decline, long-term bonds will benefit more relative to XSB, as long-term bond prices will rise more than short-term bonds. We feel this approach covers the best of both worlds and can work to an investor's benefit over the next few years.