skip to content
  1. Home
  2. >
  3. Questions
  4. >
  5. CBO: I am thinking of buying a few short term, bonds 1 to 2 years maturity, that are presently discounted with a good credit rating My thoughts are that with the capital appreciation of the bonds when t... [iShares 1-5 Year Laddered Corporate Bond Index ETF]
You can view 2 more answers this month. Sign up for a free trial for unlimited access.

Investment Q&A

Not investment advice or solicitation to buy/sell securities. Do your own due diligence and/or consult an advisor.

Q: I am thinking of buying a few short term, bonds 1 to 2 years maturity, that are presently discounted with a good credit rating
My thoughts are that with the capital appreciation of the bonds when they mature in 1 to 2 years plus the dividend I can achieve 10 to 12% return
What do you think of this ?
Can you make any suggestions as to three
possible bonds that will fulfil this criteria?
Thank you
Asked by Indra on November 15, 2023
5i Research Answer:

The bond market is vast, and there are thousands that would meet this criteria. The issue we have in such a recommendation is that many will not be available for sale at brokerages. The strategy is fine, if one can find quality bonds at a discount, but this may prove very difficult. Canada 2-year bonds are trading below $100, but yield to maturity (YTM) is 4.6%, not 10% to 12%. One can boost YTM by going for lessor quality, but this of course adds risks. Corporate bonds will yield more, but not likely 12% unless one moves into 'junk' territory. We are happy to comment on any individual bond request, but would request at least a small list at least of what your broker has available in inventory. CBO as a corporate bond fund is another option, for a diversified mix of many bonds in a laddered strategy. It only yields 3.1%, but could see decent capital gains if rates begin to decline.