-
iShares Core Canadian Short Term Bond Index ETF (XSB)
-
iShares Core Canadian Long Term Bond Index ETF (XLB)
-
Vanguard Canadian Aggregate Bond Index ETF (VAB)
-
iShares Core U.S. Aggregate Bond ETF (AGG)
Q: my position in XLB:CA has almost recovered to break even. i am adjusting my behaviour in investing to try to avoid betting on conditions such as rising , falling, or staying near current for longer. I am getting the feeling from comments that long bonds are a play on rates dropping. If this is true, i would rather be positioned in bonds for more balanced risk/return regardless of rates. Any suggestions ?
Many thanks for your great service!
Many thanks for your great service!
5i Research Answer:
Generally, the longer the duration of a bond, the more sensitive its price is to changes in interest rates. Thus, while long-term bonds historically have provided a higher interest rate than short-term bonds, these products also have greater capital appreciation potential. Currently, short-term bonds offer higher yields than long-term bonds (inverted yield curve), and if we see interest rates fall, long-term bonds have the potential to outperform shorter-duration bonds.
For a mix of yield and capital appreciation, with a more conservative balance between the two, we like using either a barbell approach between long-term and short-term bonds, XSB, (50/50 mix between the two durations), or an aggregate bond ETF, such as AGG or VAB.