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  5. CBIL: I am holding a lot of cash in anticipation of buying a condo in the next 6 months. [Global X 0-3 Month T-Bill ETF]
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Q: I am holding a lot of cash in anticipation of buying a condo in the next 6 months. My main concern is capital preservation. What is safer: short term bonds or HISAs? Assuming a significant decrease in interest rates during the next 6-8 months, would short term bonds offer a greater total return than HISAs?
Thanks!
Asked by Grant on July 30, 2024
5i Research Answer:

If one buys short term government bonds, or T-Bills, they are technically safer, as income and interest is guaranteed by the government, and HISA income via an ETF product is not. But considering the short term nature of HISAs, we would still consider them 'almost' guaranteed, just not in the legal sense of the word. Generally, traded bonds have the potential to rise in value and boost returns in a falling rate environment, whereas HISAs will see correlated decreases in returns as rates fall. But short term bonds are less sensitive to rates and we would not expect return differences to be hugely material.