Q: Some time ago when rates were starting to go up I bought XSB for the bond (cash) part of my investments, . The thinking was that the "Short" would protect against rising rates. Alas, things did not work out that way and the holding is down about 9 %, not including interest paid. At this point, can you see any advantage to holding XSB with a return of 2-3 % when GICs are available at more than 5%? Many thanks
5i Research Answer:
It has been very rough in bond land, with bonds heading for their third consecutive annual loss, which has never happened in the entire history of the bond market, going back multi-centuries. XSB's five year return is 1.02%, three year -1.3% and one year 2.23%. Timing of this purchase was not ideal of course. XSB's duration is 2.6 years, so if rates do fall its unit price could rise, and of course a GIC would not. If rates fall, total return here might go to 5% to 6%, but vs a guaranteed 5%+ on a GIC the GIC looks better right now to us.