Q: Would you consider Guardian Ult-Shrt US TB USD ETF (US $ denom) to be one of the safest ways to hold USD? Last monthly interest payment was 5% annualized which is quite favourable … seems others may not offer higher rates.
Initially the plan was at sub 4.5% level to put this cash elsewhere but with declining US Bond prices I am now wondering how quickly rates may move lower and am wondering if we may experience a diverging interest rate environment between Cda n US rates. What’s the likelihood we could see such divergence n is there a point where the effect of a weakening Canadian dlr would limit further divergence (we are weak at 72.5 exch now but recall a lo of 68 many years ago).
Initially the plan was at sub 4.5% level to put this cash elsewhere but with declining US Bond prices I am now wondering how quickly rates may move lower and am wondering if we may experience a diverging interest rate environment between Cda n US rates. What’s the likelihood we could see such divergence n is there a point where the effect of a weakening Canadian dlr would limit further divergence (we are weak at 72.5 exch now but recall a lo of 68 many years ago).
5i Research Answer:
We do continue to think that CAN rates will fall faster than US rates, simply because our economy is weaker and inflation lower. The BoC makes its next decision today. Thus, we would continue to see the US dollar stronger on a relative basis. GUTB holds securities with three months to maturity or less, and we would see it as extremely safe for cash parking. It is fairly small at $60M and fees are 0.14%. Indicated yield is 4.8% but we would expect that to move lower over time. Considering its short maturies, we would not expect significant moves up in the unit price if rates do fall. Its 52-week price range is only 28 cents.