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BMO Aggregate Bond Index ETF (ZAG $13.99)
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Global X Mid-Term Government Bond Premium Yield ETF (PAYM $18.99)
Q: I have a GIC maturing shortly in my RIF. Would like to keep the funds in some type of income/reasonably secure investment, but am having trouble accepting current GIC rates. I have been looking at ZAG, but admit that PAYM has also caught my eye. Could you compare these two and comment on your preference and why (other suggestions are welcome). Also, any comment on where interest rates might be heading over the next or so.
Thank-you
Thank-you
5i Research Answer:
ZAG is an $11B bond fund, fees are 0.09%, yield 3.43%, 3-year return 5.74%. It owns Canada bonds in a diversified maturity schedule, with average duration 7.6 years.
PAYM is a new fund, investing in mid-term Canadas (78%) and US (21%). It has only $10M in assets, yield is 7.27%, YTD return 2.3% (ZAG YTD is 3.58). PAYM uses covered calls and a put strategy to enhance income. This raises yield but the fund could lag others in a bond rally. We have no objections to it, but right now it is too small and new for serious consideration. We prefer ZAG today.
The Canadian economy continues to struggle, and the new budget is really not going to improve things. We think Canada rates will continue to tick down over the next year.