Hank Cunningham

Appropriate to do so. To abandon ship now would undo a lot of the work that they've done. Those expecting rate relief in the near term are going to be disappointed.

Expectations seem to be grounding at 3% now. Inflation is the enemy of bonds, so it's the key driver for the bond markets. For $100 today compounded at 3%, in 10 years it's worth $65.

Inflation isn't going away. The Fed and BOC aren't going to slash rates in March.

He doesn't know, but bond yields, especially the longer-term ones, are too low. If you buy a 10-year bond, you want to be paid, and you're not. Right now, a 10-year Canada bond is around 3.40-3.45%, and inflation's just over 3%. Normally, you get a term premium when you buy a long-term bond, and right now you're not getting one.

In his opinion, long-term bond yields are going to rise in the next few months, and the bonds will fall.

No. Their fiscal situation is far worse than ours. Their debt servicing costs are now bigger than their military budget. They're selling bonds out of the Fed's balance sheet at about $60B a month, and the Chinese and Japanese have been selling  bonds. 

Who's going to buy all these bonds? One of these days there's going to be a bad auction, and bond yields will flip higher. Right now, the market seems to be absorbing the supply fairly well.

We have no evidence yet of any credit issues. Corporate bond spreads are very tight to government bonds, both investment grade and high yield. If there's a recession coming, they haven't told the corporate bond market about it yet. There could be some pain, credit contraction, but so far no evidence of that.

Don't worry, you'll get your money back. There are no secured bonds in the banking sector, so these are really close to the top of the credit pile, though deposit notes rank ahead of them. CIBC is AA-rated, safe, you'll be fine.

Credit is fine with all the provinces. You're in the red now, as yields have risen since you bought. Thinks yields will rise some more. If it's the only one you own, sell it, buy something shorter term. Not getting paid for the longer-term risk.

He favours a laddered approach. Take your money, divide it into 3-4 parcels, and buy different maturities. Lots of options such as BCE and Telus. See his Top Picks.

Yes, substantial capital gain if yields fell to, say, 3%. But he doesn't think they'll do that.

They just had a serious capital gain in the last 4 months in the US bond market. The longer the bond, the greater the volatility. The value of 1 bps is greater at 30 years than it is at 5. For a given yield movement, the 30-year will move a lot more than the 10-, 5-, or 3-year. 

Some people have to buy them. Insurance companies, for example, match their liabilities with government long-term assets. The actuaries insist those companies buy them. But the individual investor stays fairly short, unless they're speculating. Bonds are not the place to speculate, save that for stocks.

The bond portfolio is your "sleep at night" money, so you want to keep it safe and short.

Right now, corporate bonds are very expensive compared to government bonds, the tightest spreads have been in years for both investment-grade and high yield. He'd favour owning government bonds. Provincial bonds yield more than the Government of Canada bonds do. Pretty attractive yield compared to corporates. 6 years and under is the sweet spot for the term.

Right now, corporate bonds are very expensive compared to government bonds, the tightest spreads have been in years for both investment-grade and high yield. He'd favour owning government bonds. Provincial bonds yield more than the Government of Canada bonds do. Pretty attractive yield compared to corporates. 6 years and under is the sweet spot for the term.

The yield curve's inverted, so the best yield you can find is at the 3-year term. In his forecast, he has the yield curve tilting downwards under 5-6 years. You'll get a reasonable return on a short-term investment, without risking a lot. Likes the risk/reward.

Thinks the rates in the 3-6 year timeframe will come down. A lot depends on the BOC. The 5-year yield is very important in Canada. That's where the mortgage rates come from. Banks usually fund themselves with 5-year money to fill up the mortgage market. Though the 5-year yield has risen lately, the longer chart shows that it's actually gone down quite sharply. 

Designed to protect from the ravages of inflation. The real return rate itself is highly variable, now they're under 2%, and they were negative a couple of years ago. Long duration, low coupon, nominal yields, risky. A messy security. Worst performers in the bond market last 3 years, by far.

Buy 1/2 CBH and 1/2 CLG. Favours the laddered approach, so your money isn't maturing all at once or for quite a while.