Q: If interest rates are poised to come down, do you see an opportunity for some short to medium term gains with bonds? If so, would the sweet spot be with short, medium, or long term bonds? Are there any bond ETFs that you could suggest?
5i Research Answer:
It is tough to anticipate movements within the short to medium-term, but we feel that any potential downward surprise in one of the upcoming inflation reports could spark a bond rally, forcing bond yields lower. For higher return potential, long-term bonds would see the highest price return in this scenario, while short-term bonds would have a much more muted response. For long-term bond ETFs, we like XLB for Canadian bonds and TLT for US long-term bonds.