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iShares Core Canadian Short Term Bond Index ETF (XSB $27.14)
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iShares Core Canadian Universe Bond Index ETF (XBB $28.56)
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iShares Core Canadian Long Term Bond Index ETF (XLB $19.20)
with the Fed govt going into more debt , interest rate pending cut by Bank of Canada
what is going to happen to the bond funds in gneral? I do have XBB, XLB all losing some grounds
If indeed there is inflation due to the tariffs hitting the basic goods and little growth, how does it affect the bond funds?
thank you
Michael
Bonds, normally, react positively to interest rate cuts, with longer term bonds (XLB) have more sensitivity to rates than shorter term bonds (XSB). But, 'market' rates can often different from overnight bank rates, and this is where expectations and inflation comes in. If bond investors are concerned about inflation, market yields can still rise and negatively impact bond funds, even when Central Bank rates are falling. This is partially what is occurring right now, with many funds' returns just scraping along at barely 1%. Inflation in Canada is largely under control, but is still a bit higher than desired in the US. In Canada, we are starting to see some economic weakness, and this 'should' translate into lower market rates going forward and should result in better bond fund returns going forward as well (the exception may be on floating rate bonds, of course). Essentially, we would not look at the weak bond returns of the past three years and expect the same. Bonds could do better in the future, and if the stock market corrects this could have a positive influence on bonds as well as money seeks a haven.