Investment Q&A

Q: Hello 5i Team

I currently hold a Canada Real Return Bond (Canada Dec-21) in a RRSP account which matures December 01, 2021.

I would like to maintain my current exposure to Real Return Bonds, however from experience I find it very difficult to purchase Real Return Bonds from my discount broker.

I am looking at the following current Real Return Bond ETF:

XRB – MER = 0.39 % – Effective Duration 15.26 year – YTM 1.83 %

ZRR – MER = 0.28 % – Effective Duration 15.91 year – YTM 1.65 %

Three newer ETFs based on the US short term TIPS are as follows:

BMO Short-Term US TIPS Index ETF (Hedged Units) [ZTIP.F] – MER = 0.17 % – Effective Duration 2.65 year – YTM 0.24 %

iShares 0-5 Year TIPS Bond Index ETF (CAD-Hedged) [XSTH] – MER = 0.15 % – Effective Duration 2.60 years – YTM 0.23 %

Mackenzie US TIPS Index ETF (CAD-Hedged) [QTIP] – MER = 0.17 % – Effective Duration 8.05 year – YTM 1.13 %

Which ETF would be a suitable replacement for my Canadian $ Real Return Bond maturing on December 01, 2021?

Thank you

Q: Could you please comment on Closed end Municipal Bond Funds in the U.S.? How are they leveraged, and are they a good safe investments as a hedge against more troubled times next year? Any picks?

Q: Hello 5i Team

I currently hold PH&N High Yield Bond Fund Series D (RBF1280) in a RRSP account.

I would like to transition from this mutual fund to an equivalent ETF.

What ETF would be a suitable replacement for this mutual fund, trading in Canadian dollars on the TSX?

Thank you

Q: Hello,

I am concerned in a rising interest rate environment CBO (5.0%), CPD (1.92%), XHY (7.4%), VAB (4.13%) are positions that need to change in my portfolio. Portfolio Analytics recommends holding 35% in fixed income. I currently hold about 18%.

Should I be selling some or all of these positions and then re-investing in other fixed income vehicles given the rising interest rates?

I would appreciate your feedback/suggestions on current position. Thanks again for all your great service.

Q: How would IShares Preferred share ETF (CPD) and IShares Convertible Bond ETF (CVD) perform in a rising rate environment?

Thanks, Mike

Q: Expectations of sooner-than-expected rate increases have pushed short-term yields higher in recent days. If so, interest rates could be headed up faster than thought, with dismal consequences for stock prices and real estate speculators. Can you suggest a Canadian Bond EFT that would be suitable during this period of inflation? Cheers.

Q: The short duration bond ETFs like these have declined in last few months with possibility of increased rates. If these are held for five years, would there still be loss of principal, if interest rates stay higher than today. I was assuming if bonds are held to maturity, there is no loss of principal. Hopefully, my question makes sense.

Q: Can you explain the difference between Distribution yield advertised as 12.88% and trailing yield of 4.23%. I am looking to buy some fixed income, would this be a safe bet?

Q: Hello 5i Team

In a taxable non-registered account denominated in US$ I hold Berkshire Hathaway (BRK-B) as a proxy for the US market in which no dividends are paid.

I would like to complement 20 % of the account value in US government bonds as a hedge against market corrections.

This account has a time horizon of greater than five years before any funds are withdrawn.

Which ETF (I used iShares as the ETF provider) would be most suitable for this account:

3-7 Year Treasury Bonds (IEI) duration = 4.66 years
7-10 Year Treasury Bonds (IEF) duration = 8.01 years
10-20 Year Treasury Bonds (TLH) duration = 14.89 years
20 Year Treasury Bonds (TLT) duration = 19 years

Or should I use a general US Treasury Bond ETF (GOVT) with a duration of 6.79 years.

If the same question is asked and US Government TIPS are utilized in place of US Government regular bonds which of the ETF below would be suitable:

0-5 Year TIPS (STIP) duration = 2.60 years
General TIPS ETF (TIP) duration =7.68 years

Thank you

Q: I asked a question about XSTH a few days ago. Your main concern was the fact that it was new and very small asset wise. What about if I bought STIP on the Us exchange instead? It has been around since 2010 and has more assets. What would your opinion be on this?

Q: I am puzzled by their recent $75m bought deal when they have such a large amount to come in. Any thoughts?

Q: Hello, for tax purposes is the income of CVD treated as interest or dividend? If you had to choose just one with the goal of income and "safety", which one would you pick? Thank you

Q: Two separate questions on the same theme I guess. First, Can you comment on CAE’s ability to deal with an inflationary environment, especially if interest rates were to rise? Thinking of their balance sheet, “pricing power” and so on, as well as their current P/E versus historic. Second, wondering how XHY might fare in the near term as well? Looking at the last number of years it has held up pretty well considering the yield, but it seems like a fair number of storm clouds gathering on the horizon that make me wonder about defaults etc.
Thank you,

Q: Have some US$. Thoughts on the Zero Coupon product from Pimco.

Q: As retirees we hold XEI and XTR for the Cdn income generation portion of our portfolio . Recently I discovered that there is also XDIV which has a much lower MER. Would you endorse moving completely out of XEI and XTR to XDIV instead?

Q: Which of QTIPS vs TIPS would you recommend given fees etc and how the US/CAD dollars would likely move in the event of longer term inflation? Any other bond investments that could provide better income and safety if 10-year yield continues to rise?

Q: What are your thoughts of ZRR given the current inflation and interest rate environment? Would you invest in it at this time?
Thanks

Q: I have held these three funds since early 2016 for the stability component (maintain capital and some income) in my portfolio. The annual MER's are .44, .86 and .84. respectively, I have series F in the PMO funds. Extra year end distributions for the PMO funds were nice but they stopped after 2018 year end.

Their total capital growth has been very modest, about 2-4% total over several years.

I am not too comfortable with the higher annual MER's.

Could you comment if I might see significant capital drop if interest rates go up? Also, could you recommend any different holding or stock that I may consider instead of these funds for stability and income?

Thank You.

Q: Bloomberg is saying today "Tech stocks sell off amid spike in treasury yields". Can you please explain what the spike in yields is referring to, how much is the spike, will it move somewhat predictably with the withdrawl of govt liquidity from the market, etc?
For a retiree, should I do something?
Really appreciate your clear views. Many thanks

Q: Long term bond prices rose during previous tapering periods (following 2014 QE for example). Given this, and the relative certainty tapering is coming soon, would now be a good time to add to one's long and short term bond holdings? If I'm incorrect, please explain why? Thank you, great service.