skip to content
  1. Home
  2. >
  3. Questions
  4. >
  5. ZLC: Canada's interest rate has dropped, and bank GIC and HISA rates have followed suit. [BMO Long 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: Canada's interest rate has dropped, and bank GIC and HISA rates have followed suit. The ZLC BMO Long Corporate Bond ETF is offering a 4.83% return. Can this investment completely replace my HISA or GIC? I've previously invested a significant amount in ZLC, and with the recent dip in price, I'm considering continuing to buy more to replace my GIC and HISA ETF. I suspect this might be the last opportunity to buy bonds at a low price. I'd appreciate your insights. Thanks.
Asked by Esther on August 22, 2025
5i Research Answer:

A couple of points: While we are completely comfortable with ZLC as a corporate bond fund, it is important to note that bonds can act very differently than 'cash', which is what a GIC and HISA are. Bonds can and have declined, just ask any investor in 2022 or 2023. If cash is needed for a defined purpose, or one wants 0% risk, we would not switch to bonds. They are fine for part of a fixed income allocation, or even ALL of an allocation, but investors need to understand that a bond fund is very different than cash. Two, ZLC is corporate bonds, and these two can act differently at times from government bonds. In a recession, even if rates move lower, corporate bond spreads can widen and losses can occur. We do think rates will move lower, and we do think bonds and bond funds offer decent potential from today's levels. But we would keep risks in mind here as well. A partial swap is probably the better move here, to keep some cash allocation.