Q: Tom Czitron had an interesting article in the Globe and Mail for January 30. Would you agree with his thesis? He concluded with this paragraph: "This year may prove to be a wild ride for financial markets. An increasingly volatile global political situation adds to the appeal of North American bonds, and mid-term government bonds may be a relatively headache free place to be. A good way to gain exposure is the BMO Mid Provincial Bond Index ETF. It covers a promising area of the yield curve with some extra yield and no corporate credit risk." The ETF he recommended is ZMP.
We have decided to allocate 80% to equities, and 20% to bonds, and would appreciate your views on ZMP being part of our fixed income holdings.
Thanks for your insight.
We have decided to allocate 80% to equities, and 20% to bonds, and would appreciate your views on ZMP being part of our fixed income holdings.
Thanks for your insight.
5i Research Answer:
We think the thesis makes sense. With rates likely to drop and markets (always) volatile, we would consider ZMP a solid option. Assets are $300M, fees 0.28%. While provinces cannot 'print money' to pay their bills, provincial bonds essentially have a 'soft' guarantee from the FEDs. Indicated yield is 3.02%. Returns have not been great as recent performance has been impacted by the uptick in rates, but this should change going foward. We would be comfortable owning this.