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iShares Core Canadian Short Term Bond Index ETF (XSB)
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iShares Core Canadian Universe Bond Index ETF (XBB)
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iShares Core U.S. Aggregate Bond ETF (AGG)
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iShares 1-3 Year Treasury Bond ETF (SHY)
Q: Good afternoon 5i staff
To a question concerning the possibility of inflation and David Rosenberg’s reaction to that, you said:
For Canada, we like XSB, and for the US we like SHY.
I hope I am not quoting you out of context here. But, I was wondering whether you were saying that ´supposing ‘ an inflationary environment, we would choose these. Or, whether you meant that we would be facing an inflationary environment and these would be the best choice. In other words, in your opinion, which would be the best choice for today for a permanent allotment to bond funds, short term or longer, such as xsb and agg.?
Thanks
To a question concerning the possibility of inflation and David Rosenberg’s reaction to that, you said:
For Canada, we like XSB, and for the US we like SHY.
I hope I am not quoting you out of context here. But, I was wondering whether you were saying that ´supposing ‘ an inflationary environment, we would choose these. Or, whether you meant that we would be facing an inflationary environment and these would be the best choice. In other words, in your opinion, which would be the best choice for today for a permanent allotment to bond funds, short term or longer, such as xsb and agg.?
Thanks
5i Research Answer:
We meant 'in' an inflationary environment, one is best sticking with short term duration bonds. Bonds are very sensitive to rates, and if inflation rises so will interest rates, and long term bonds will get hit hard in such a scenario. Keeping maturities short helps limits any damage from rate hikes, as constant maturities are re-invested at higher rates. For today, with rates likely heading lower, we would prefer a mixed maturity schedule with a fund like XBB or CBO.