I've been reviewing the DEX Universe Bond Index yields and noticed that the 1 year yield is 9.56%! Even the 5 year return is pretty high - 6.9%. I'm interested in putting some money in Manulife's Canadian Bond Index Fund (which tracks the DEX Universe Bond Index, 100% weighting) but I don't understand how this bond yield can be so high. Manulife's fund has 44% in Canadian Federal Bonds, 28% in Provincial bonds, and some corporate, municipal bonds.
I'm guessing the fund is taking advantage of the recent drop in interest rates over the past few years by selling high yielding bonds above purchase prices? Or is there a different reason for such a high yield?