# Bonds out of favour... contrarian trade?



## james4beach (Nov 15, 2012)

This started with me scratching my head about the high trading volume on XSB and XBB (it was 5 times the normal volume yesterday!) and then I found out that foreign investors have been dumping Canadian bonds like crazy, explaining the elevated ETF volume I observed in the last month:

http://business.financialpost.com/2013/09/04/etf-industry-cools-off-in-august/
http://www.theglobeandmail.com/repo...ailing-out-of-canadian-bonds/article13824390/

According to the globe article, this is the largest decline in foreign-held Canadian securities since 2007 and that's concentrated almost exclusively in bonds. Talk about out of favour!

So given that foreign investors are dumping our bonds and driving the price down (yields up) this sounds to me like a good time to buy some bonds. Particularly I'm looking at government bonds held to maturity in the 5 year range. Any others buying?


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## james4beach (Nov 15, 2012)

The article also suggests that government bonds may the most out of favour:



> The divestment primarily targeted debt issued by the federal government and the companies it controls, according to Statistics Canada’s monthly report on international securities transactions.


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## liquidfinance (Jan 28, 2011)

I'm thinking of buying soon. Only in my Sons RESP seeing as I can't touch the money and it's a long time horizon.


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## HaroldCrump (Jun 10, 2009)

james4beach said:


> So given that foreign investors are dumping our bonds and driving the price down (yields up) this sounds to me like a good time to buy some bonds. Particularly I'm looking at government bonds held to maturity in the 5 year range. Any others buying?


I agree with your general idea, but IMHO, it may be a little early.
The flight of capital has started very recently (mid-May) and could take several months to form a bottom.
Also, keep in mind that the Sep FOMC meeting coming up could be key.

The market may have already priced in the $25B reduction in Q/E ("tapering"), but there could be language in there to suggest that tapering will intensify during 2014 i.e. unwinding of Q/E.
If so, yield will rise even further.

Also, note that the UK guilt went past 3% today.
IMHO, all indicators are pointing to rising yields, unless we see a tapering of the taper talk and/or a new type of Q/E.


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## james4beach (Nov 15, 2012)

I agree it looks too early to buy. I feel like both bond yields (and GIC yields) will go higher still.

The 2.8% you can get in 5 year GICs is starting to look very appealing.

I'm not suggesting bond funds or bond ETFs, by the way. I would either buy GICs myself or the government bonds directly, held to maturity.


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## tygrus (Mar 13, 2012)

james, you are missing some of the underlying realities of bonds and why yeilds are dropping. They are about to become like your bank account, paying little to no interest because the central banks want money out in circulation (i.e equities), not laying around in safe investments. Google the great rollover before you jump.


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## fatcat (Nov 11, 2009)

i agree with harold
i am looking to add to my utilities, i see little movements back up but get the feeling that the fed has everyone on hold and their meeting will be key
we are likely to see tapering and a concomitant panic in rising yields and perhaps dropping equties

bill gross says that bonds are priced about right at the moment, though he clearly has a bias: http://forexblog.oanda.com/20130903/bill-gross-market-pricing-4-fed-funds-rate-in-2018/

i would avoid utilities, reits, gic's and bonds for the time being

james, you can get 3% for a 5 year at home trust


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## neoabraxas (Mar 4, 2013)

I'm stuck with a large position in CLF where I bought around 19.53 and now it's down to 19.30. Is it worth waiting it out to be made whole by the interest payments or is there still a significant downside potential in this ETF? I thought that buying relatively short term bonds would insulate me from losses due to rising interest rates... I guess you live and learn. BTW. this is held in my RRSP so taxes aren't an issue either way...


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## HaroldCrump (Jun 10, 2009)

CLF has good aspects to it, and bad aspects.
On the good side, it has low duration (< 5), which is good in this environment.
Your losses will be less than someone holding bond ETFs with higher average duration.

But, on the -ve side, it is meant for very small investors for whom it is uneconomical to buy bonds directly.
For anyone else with slightly higher portfolio size, it is far more efficient to buy govt. bonds directly and hold to maturity.
The bonds in CLF's portfolio are all highly liquid and should be available through all Canadian brokerages.
The spreads on those bonds will also be pretty tight.

If low duration govt. bonds is what you need, dump CLF now and buy the bonds directly and hold to maturity.


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## neoabraxas (Mar 4, 2013)

I just use it as a catch all bond ETF in my porfolio as opposed to something broader like XBB


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## HaroldCrump (Jun 10, 2009)

At those yields, you can probably do better with a 5 yr. GIC.
YTM for the CLF is 1.80%.
Since the average duration is short and the credit quality high, you will do better than most other bond funds like XBB.
But there will be losses if yields continue rising.


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## james4beach (Nov 15, 2012)

CLF yield to maturity is 1.87% - 0.17% MER = 1.7% from what I can see, that's for average 3 year maturity

Even with a 3 year GIC you'd get 2.2% which is considerably more than CLF yield.

It's hard to make a case for buying any bond ETF


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## fatcat (Nov 11, 2009)

james4beach said:


> CLF yield to maturity is 1.87% - 0.17% MER = 1.7% from what I can see, that's for average 3 year maturity
> 
> Even with a 3 year GIC you'd get 2.2% which is considerably more than CLF yield.
> 
> It's hard to make a case for buying any bond ETF


you can also buy an 18-month gic @ 2.3 ...


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## james4beach (Nov 15, 2012)

fatcat said:


> you can also buy an 18-month gic @ 2.3 ...


Where was that, fatcat?


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## My Own Advisor (Sep 24, 2012)

Seems like a contrarian trade to me, but I won't be buying bonds now.


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## doctrine (Sep 30, 2011)

I don't think its really contrarian.. not exactly blood on the streets when governments and corporations are still getting 20-30 year bonds at 4% or less.


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## fatcat (Nov 11, 2009)

james4beach said:


> Where was that, fatcat?


http://hometrustdeposits.com/rates/

1-year=1.85
1.5 years=2.05
5 years=2.75

all of their gic's come with a .25% bonus until nov-30 (so add .25 to the above rates ... 1-year = 1.85 + .25 = 2.10 eg.)

i have an 18-month with them and have found them very good to deal with


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## james4beach (Nov 15, 2012)

doctrine said:


> I don't think its really contrarian.. not exactly blood on the streets when governments and corporations are still getting 20-30 year bonds at 4% or less.


That's a good point. Big picture, bond yields are still at historical lows.

Could you imagine if the bond bubble bursts and interest rates go up to double digits % ... wow ... that would be killer. Savers would love it.


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## HaroldCrump (Jun 10, 2009)

james4beach said:


> Could you imagine if the bond bubble bursts and interest rates go up to double digits % ... wow ... that would be killer. Savers would love it.


Um, well, at double digit rates many G8 governments won't be able to service their own debt.


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## james4beach (Nov 15, 2012)

Bought some 2021 maturity Government of Canada bonds, 9.75% coupon, yield to maturity 2.48% after fees
I'm basically paying 3 basis points of yield for "fees" ... ridiculously cheaper than XBB where you pay 33 basis points!

Figured with the bloodbath in Canadian bonds, it was time to buy some. Buy low, right?
I realize the price can decline much more but I will hold to maturity, so the 2.48% return is guaranteed.

In fact the yield could turn out to be higher than 2.48% if interest rates *rise* and I can reinvest the juicy 9.75% coupon at higher rates.

Yes I realize GICs pay higher yields but the government bond appeals to me for safety, liquidity, collateral quality, and the high coupon cashflow.


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## gibor365 (Apr 1, 2011)

My Own Advisor said:


> Seems like a contrarian trade to me, but I won't be buying bonds now.


As per coach potato strategy (ex. Andrew Hallam) now it's a time to move equities ETF (esp US ones) to bonds ETF. I'm in dilemma about CBO that I hold for several years.... CBO YTM after MER is 2.26%


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## Squash500 (May 16, 2009)

james4beach said:


> Bought some 2021 maturity Government of Canada bonds, 9.75% coupon, yield to maturity 2.48% after fees
> I'm basically paying 3 basis points of yield for "fees" ... ridiculously cheaper than XBB where you pay 33 basis points!
> 
> Figured with the bloodbath in Canadian bonds, it was time to buy some. Buy low, right?
> ...


James if you don't mind my asking...did you buy this individual gov't bond in your RRSP or for your non-registered account? If you bought this bond for your non-registered account wouldn't it be bad tax wise because you've guaranteed yourself a definite capital loss when either you sell the bond early or even if you hold it to maturity?


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## andrewf (Mar 1, 2010)

I don't see the appeal in holding 8 year bonds as 2.48%.


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## My Own Advisor (Sep 24, 2012)

Nope.


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## gibor365 (Apr 1, 2011)

andrewf said:


> I don't see the appeal in holding 8 year bonds as 2.48%.


why 8 years? it's s short term ones


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## james4beach (Nov 15, 2012)

Squash500 said:


> James if you don't mind my asking...did you buy this individual gov't bond in your RRSP or for your non-registered account? If you bought this bond for your non-registered account wouldn't it be bad tax wise because you've guaranteed yourself a definite capital loss when either you sell the bond early or even if you hold it to maturity?


This bond is in the RRSP... you're right, in a non-registered account it would be a tax disaster. High coupon bonds should go in a tax shelter, low coupon bonds in non-registered. (Special case: zero coupon bonds go in tax shelter)


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## james4beach (Nov 15, 2012)

Well many of you hold bond ETFs right? Just about everyone needs some bond exposure.

This is just part of my fixed income exposure, and I'll argue that the individual bonds I buy (like this one) are a much better deal than a bond ETF. Since I have to regularly buy bonds anyway, I feel good about buying it with these recent sharp price declines. At least I'm buying them relatively low.

Also I think that deflation & deleveraging are a real possibility and that makes government bonds sound more appealing to me


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## Squash500 (May 16, 2009)

james4beach said:


> This bond is in the RRSP... you're right, in a non-registered account it would be a tax disaster. High coupon bonds should go in a tax shelter, low coupon bonds in non-registered. (Special case: zero coupon bonds go in tax shelter)


Thanks for responding James. IMHO the fact that you bought this bond for your RRSP makes total sense. My problem is that I have a very small RRSP so buying this type of bond wouldn't make sense for me personally as the majority of my assets are in my non-registered account.


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## Squash500 (May 16, 2009)

james4beach said:


> Well many of you hold bond ETFs right? Just about everyone needs some bond exposure.
> 
> This is just part of my fixed income exposure, and I'll argue that the individual bonds I buy (like this one) are a much better deal than a bond ETF. Since I have to regularly buy bonds anyway, I feel good about buying it with these recent sharp price declines. At least I'm buying them relatively low.
> 
> Also I think that deflation & deleveraging are a real possibility and that makes government bonds sound more appealing to me


James I'm really trying to learn about individual bonds so maybe you can help me out? I found the government bond that you recently bought on canadianfixedincome.ca.

Here it is: Canada 9.75% maturity June 1/2021 price 150.97 Y to M 2.46%. Let's say you bought $30000 worth of this bond....then you would have had to pay approx. $45291 plus accrued interest to buy this bond. You've already locked in a capital loss of $15291 as you'll only get $30000 back (par 100) when this bond matures in June of 2021.

I guess a month or two ago this bond could have been priced as high as 160.00 etc?

However every 6 months you'll get a juicy coupon of 9.75% to re-invest in whatever you see fit? Am I on the right track with my numbers? Your 100% correct....that buying a bond like this would be a total disaster tax wise in a non-registered account.

So sticking with the 30K (as an example) ....you'll make 30000 x 9.75%=$2925/yr or 1462.50 every six months.

So your total profit if you hold this bond to maturity will be approx $23400 (2925 x8 years)-15291=$8109 guaranteed profit plus whatever money you can earn on that $1462.50 that you'll receive every six months.


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## james4beach (Nov 15, 2012)

Squash500 said:


> James I'm really trying to learn about individual bonds so maybe you can help me out? I found the government bond that you recently bought on canadianfixedincome.ca.


Sure happy to help. That's a very useful site by the way, just note that only the top section are real time prices for today and the bottom section is 'after close' (so the last trading day)... if you're about to place a trade, remember that those prices are stale.



> Here it is: Canada 9.75% maturity June 1/2021 price 150.97 Y to M 2.46%. Let's say you bought $30000 worth of this bond....then you would have had to pay approx. $45291 plus accrued interest to buy this bond. You've already locked in a capital loss of $15291 as you'll only get $30000 back (par 100) when this bond matures in June of 2021.


Looks right so far, including the capital loss. You would pay $833 of accrued interest in addition to the bond price for a total cost of $46,124



> However every 6 months you'll get a juicy coupon of 9.75% to re-invest in whatever you see fit? Am I on the right track with my numbers? Your 100% correct....that buying a bond like this would be a total disaster tax wise in a non-registered account.
> 
> So sticking with the 30K (as an example) ....you'll make 30000 x 9.75%=$2925/yr or 1462.50 every six months.


Right. The bond will pay you taxable coupon interest of $1,462.50 every June and December. That's a lot of cashflow, can you can reinvest it however you want.



> So your total profit if you hold this bond to maturity will be approx $23400 (2925 x8 years)-15291=$8109 guaranteed profit plus whatever money you can earn on that $1462.50 that you'll receive every six months.


That's about right. Even if you earn 0% on reinvested coupons, it's $7,276 profit no matter what (your number minus the accrued interest you omitted)

That interest rate for reinvested coupons is a critical part of the bond yield calculation. Bond calculations assume that coupons are reinvested at the same interest rate as the bond's own yield to maturity. In my calculator that turns out to be the 2.47% ... this is obviously an artificial assumption. Nobody knows what rate the coupons can be reinvested at.

That's how YTM is calculated. When all coupons are reinvested at 2.47%, this results in total future value of $55,682 (which is $9,557 profit) at maturity versus the $46,124 initial cost. The yield is thus
(55682 / 46124) ^ (365 days / 2818 days) - 1 = 2.47%


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## humble_pie (Jun 7, 2009)

james4beach said:


> ... That's how YTM is calculated. When all coupons are reinvested at 2.47%, this results in total future value of $55,682 (which is $9,557 profit) at maturity versus the $46,124 initial cost. The yield is thus
> (55682 / 46124) ^ (365 days / 2818 days) - 1 = 2.47%



this is describing the bond as if it were a zero coupon, but it's one way of showing its value. Or rather, lack of value.

i don't see any value in this bond whatsoever. Committing one's money out until the next decade - eight long years - at roughly 2.50% interest strikes me as foolish. It's a given that inflation is likely to erode the 2021 purchasing power of that eventual $55k down to perhaps $25k in today's purchasing terms. Possibly even less.

i'm not a bond person, but i believe that bonds are not yet out of favour. The worst is yet to come. An 8-year bond will be subject to drastic price drops, as will all long-term bonds. 

imagine how a cautious investor might feel when, reading his investment statement in 2016, he sees that the price of the wretched bond he paid $153.70 for has dropped to, say, $102.50. When he sees that the holding he paid $46,124 for has dropped to $30,615 in only 3 short years. When he knows that the cost of living has augmented - & will likely augment - by 10% per annum. When he knows that he is trapped inside those bonds, with their miserable low 2.49% yield, until maturity another five years hence.


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## andrewf (Mar 1, 2010)

I don't understand how 2.5% yield = out of favour. That tells me that people value bonds very highly, to be happy with a 0.5% real yield.


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## humble_pie (Jun 7, 2009)

andrewf said:


> I don't understand how 2.5% yield = out of favour. That tells me that people value bonds very highly, to be happy with a 0.5% real yield.




it's the long-term consequences that can be disastrous. This is a long-term bond. 

2.47% looks fine in the short term, at today's official inflation rates - which are laughably below the real rise in cost-of-living that consumers are experiencing in the home, in the streets, at the gas stations, in the malls, in the steady rise in service fees.

but 2.47% becomes undesirable over 8 years, as of this point in time. I mentioned why, no need to repeat. Long-term bonds today have built-in risk factors. IMHO it's irresponsible not to set these forth.


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## james4beach (Nov 15, 2012)

Echoing what others have posted above: the price of bonds can certainly drop further and long maturity bonds could drop a lot.

But humble_pie and andrewf: are you also telling people to not buy XBB or any other standard bond mutual fund? I'm sure you're aware that the average maturity in those is 10 years ... even longer than this bond I bought ... and for instance XBB holds a significant amount in bonds that are over 20 years maturity!


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## james4beach (Nov 15, 2012)

andrewf said:


> I don't understand how 2.5% yield = out of favour. That tells me that people value bonds very highly, to be happy with a 0.5% real yield.


That's a good point. But out of favour I guess is a question of context

In the context of the last 3 years, bonds are out of favour and the yields are pretty good now
In the context of the last 10, 20, or 30 years bond yields are still terribly low

Because I, personally, have to make fixed income allocation decisions within the 3 year context (and I can't wait 10 years) I like the idea of buying some now.


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## My Own Advisor (Sep 24, 2012)

XBB:

Maturity as of 10-Sep-2013 View all holdings Timeframe % of Maturity 
0 - 1 Year 0.00% 
1 - 5 Years 42.65% 
5 - 10 Years 27.61% 
10 - 15 Years 4.55% 
15 - 20 Years 6.04% 
20 - 25 Years 5.38% 
25+ Years 13.16% 
Average: 9.53 Years 

I wouldn't say significant amount of bonds >20 years duration, but a portion, yes.
http://ca.ishares.com/product_info/fund/overview/XBB.htm

YTM = 2.94%. Not great, agreed with everyone about bond yields but not horrible in an all-in-one product for someone holding bonds in their RRSP or TFSA for another 10-20 years.


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## james4beach (Nov 15, 2012)

My Own Advisor said:


> I wouldn't say significant amount of bonds >20 years duration, but a portion, yes.
> http://ca.ishares.com/product_info/fund/overview/XBB.htm
> 
> YTM = 2.94%. Not great, agreed with everyone about bond yields but not horrible in an all-in-one product for someone holding bonds in their RRSP or TFSA for another 10-20 years.


Well XBB ytm is 2.61% after fees ... that's for 10 yr avg maturity, and 62% non federal risk exposure
I got 2.48% after fees, and that's for 8 yr maturity, and 0% non federal risk exposure.

I know bonds aren't for everyone but just sharing my decision process. I'm not as far out on the yield curve as them, and my risk exposure is much less too.


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## My Own Advisor (Sep 24, 2012)

All good James4...everyone's comments on any of these in CMF is what makes learning fun and interesting...

I recall you are using GICs because you have significant RE investments right? 

I don't blame you but for someone that has a pension and only one property to deal with, I feel for me, a bunch of bonds is not a good idea for long-term returns.


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## Squash500 (May 16, 2009)

james4beach said:


> Sure happy to help. That's a very useful site by the way, just note that only the top section are real time prices for today and the bottom section is 'after close' (so the last trading day)... if you're about to place a trade, remember that those prices are stale.
> 
> 
> 
> ...


James thanks for your excellent response....much appreciated.


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## humble_pie (Jun 7, 2009)

james4beach said:


> In the context of the last 3 years, bonds are out of favour and the yields are pretty good now
> In the context of the last 10, 20, or 30 years *bond yields are still terribly low*[color] Because I, personally, have to make fixed income allocation decisions within the 3 year context (and I can't wait 10 years) I like the idea of buying some now.





the historic low bond yields at present are precisely where the risk lies. Bond prices drop = yields rise. The risk that bond prices will drop & yields will rise over next 8 years is far greater than risk of the same over next 3 years. As you know.

if u are making 3-year time frame fixed income decisions, why would u be going out 8 years? there was no particular increased return incentive for the 8-year bond.

i am not sure at all that new investors understand how long bond prices can rocket up & down, far more than short bonds. They're not comparable to GICs. Anybody promoting the same should note/explain how this works imho.


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## james4beach (Nov 15, 2012)

My Own Advisor said:


> I recall you are using GICs because you have significant RE investments right?


My fixed income portfolio is a mix of bonds & GICs, and no bond funds (I think MERs on bond ETFs are way too high)



> I don't blame you but for someone that has a pension and only one property to deal with, I feel for me, a bunch of bonds is not a good idea for long-term returns.


Aha so you *do* have a huge bond fund! You have long maturity bond exposure too, it's just hidden in your pension (I'm assuming, if it's a standard pension). Yes I agree you should not go and buy more bonds.

In fact, if it's something like a federal pension, you could probably treat the whole pension like a giant bond fund and maybe your personal money should be 100% in equities. This depends on how much confidence you have that the pension will make good on its obligations to you.

Nortel and many others didn't, for instance. In those cases the investor still should have had lots of fixed income exposure, despite having a pension.


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## james4beach (Nov 15, 2012)

When I say 3 year horizon I mean that I have to make money decisions within a short time frame ... more like within 1 year actually. Because I have new money coming in, money maturing, etc. I just mean that I'm not going to wait 10 years before making a single decision in fixed income purchasing.

Yes investors should be aware that falling bond prices may result in huge unrealized losses showing in their portfolio, even if they are holding the bonds to maturity.

If you hold the bond to maturity, as long as the issuer doesn't default, that bond position will always result in profit. The losses shown in the account are not realized unless you actually sell the bond before maturity.


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## humble_pie (Jun 7, 2009)

the buying power of that $46,124 could be as low as 50% in 2021. At the very most, james has calculated $55k if all coupons compounded. But 55k in 2021 will buy far less than 55k in 2013, or 46,124 in 2013, or 30k in 2013. Just from that point of view alone, long bonds at today's prices for retail investors are double-edged investments.

i for one don't see any special merit to "cash flow" in a registered account that isn't going to be touched before 2021. All that matters in that account is quality of investment plus total return. It would not matter to me whether return would come from sustained high dividends or interest or capital gains.

then there is the probability that, at some point in time prior to 2021, the bond in question is going to be worth 60 or 70 dollars. As it happens, i believe that cautious investors will be more frightened over that situation than they would be by concomitant drop in stocks. The bond market experience of the last 2 decades seems to have generated an expectation that bonds are impregnable. Which they are not.

in other words, if inflation takes the bond price down, the investor who intends to hold a long-term bond to maturity cannot sell. But if he holds to maturity, his investment is worth only a fraction in buying power of what he paid for it.

also i don't believe the capital loss consequences are being dealt with accurately. Whether in a registered account or not, this particular bond is going to deliver a shocking capital shrinkage at maturity. Taking that loss in a registered account prevents it from being used to offset a capital gain, which makes the loss even more painful, imho.


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## gibor365 (Apr 1, 2011)

james4beach said:


> Well XBB ytm is 2.61% after fees ... that's for 10 yr avg maturity, and 62% non federal risk exposure
> I got 2.48% after fees, and that's for 8 yr maturity, and 0% non federal risk exposure.
> 
> I know bonds aren't for everyone but just sharing my decision process. I'm not as far out on the yield curve as them, and my risk exposure is much less too.


Isn't CBO better in this case? Average maturity 3.38 and YTM 2.58% - 0.2% (MER)... Credit rating A and above


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## My Own Advisor (Sep 24, 2012)

@james4...

Yes, my pension is my bond fund 
http://www.myownadvisor.ca/2012/12/...r-yourself-lucky-then-consider-it-a-big-bond/

I've got 13 years into a DB plan, not gold-plated but good. I hope I can work with my current employer and get another 15 years out of it. That puts me into my mid-50s. We'll see, nothing in life is guaranteed let alone a job.

This is why most of my personal money is, as you say, mostly equities. Not quite 100% but quite high.


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## james4beach (Nov 15, 2012)

That's funny, didn't realize you had an article exactly on that topic!

Certainly shows that each situation has to be considered individually... there are no cookie cutter answers to personal finance (perhaps other than "spend less")


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## humble_pie (Jun 7, 2009)

celebrity economist David Rosenberg tells the globe and mail's David Berman today that we're heading into a "secular bear market in long-term government bonds."

the gluskin sheff chief econo sees "moderately higher inflation" of about 2.5% along with "moderately higher interest rates" that will pull down bond prices, push up yields.

anybody on rosenberg's page better skip those 8-year long bonds.


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## andrewf (Mar 1, 2010)

I don't really listen to expert forecasts. You're better of flipping a coin.


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## humble_pie (Jun 7, 2009)

andrewf said:


> I don't really listen to expert forecasts. You're better of flipping a coin.


then why do you keep on quoting & citing their books, writings, opinions & views?


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## doctrine (Sep 30, 2011)

I don't like forecasts either. I do like estimating future returns, and that's pretty easy with bonds. The results are not good. 

Along the line of My Own Advisor's post about pensions being considered a bond fund, in a "total retirement planning" sense, you could also consider CPP and GIS to be a bond fund/fixed income and allocate accordingly. There's not a lot of people who remember that portion which can be a significant amount of retirement income for some.


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## andrewf (Mar 1, 2010)

humble_pie said:


> then why do you keep on quoting & citing their books, writings, opinions & views?


Where do I quote expert forecasts?


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## My Own Advisor (Sep 24, 2012)

@doctrine, did you get my email? I couldn't comment on your site. Apparently I'm a spambot


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## Johnny M (Aug 21, 2013)

*Bonds out of favour*

Dont buy a 5 year GIC at 2.8%. Rates are heading higher so no reason to lock in.


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## Johnny M (Aug 21, 2013)

*Floating rate bonds*

Does anyone have an opinion on floating rate bonds?
I am looking at HFR


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## james4beach (Nov 15, 2012)

Forecasting interest rates is notoriously difficult. The only thing you can say for certain is that GIC rates slightly lag bond market rates.

So far, yes, interest rates have been rising both for bonds & GICs.


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