Don’t let anyone tell you we have a bull market for everything.
Bonds are most assuredly not in a bull market. The benchmark FTSE Canada Universe Bond Index was down about 2.5 per cent for the year through the first week of September. That’s an improvement from a few months back, yet also a huge disappointment after a couple of quite good years for bonds.
How are investors reacting? There’s a strong appetite for stocks, of course. And the investors buying asset allocation exchange-traded funds – basically a diversified portfolio in a single package – are favouring a mix with a definite tilt to stocks over bonds. Yet demand for bonds is still strong, if you judge by flows of money into bond ETFs. National Bank Financial reports that $905-million poured into this category last month and $6.3-billion over the first eight months of the year. By comparison, $3.5-billion went into stocks in August and $21.5-billion for the year to date.
Where’s this bond-focused money going? Here are the four bond ETFs that took in the most money for the year through Aug. 31:
- BMO Aggregate Bond Index ETF (ZAG-T): A good low-cost option for the investor who wants exposure to the entire bond market in a single product, including government and investment-grade corporate bonds maturing in the short, medium and long term.
- BMO Government Bond Index ETF (ZGB-T): The management expense ratio, at 0.17 per cent, is almost double ZAG’s 0.09 per cent and the price of government bonds is more vulnerable to rate increases than corporates.
- iShares Core Canadian Short Term Bond Index ETF (XSB-T): A more conservative spin on a broad-market bond ETF like ZAG and the iShares Core Canadian Universe Bond Index ETF (XBB). By holding a mix of government and corporate bonds that mature in five years or less, XSB offers a degree of protection from rising rates. Basically, short-term bond prices should fall less than longer-term bonds as rates ratchet higher.
- iShares Core Canadian Short Term Corporate Bond Index ETF (XSH-T): Like XSB, but with a pure focus on corporate bonds. Corporates carry more default risk than government bonds, even those that are financially strong enough to get an investment-grade credit rating. The offset is a mildly higher yield, and a little less downside when interest rates rise.
-- Rob Carrick, personal finance columnist
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The Rundown
The cannabis collapse: Why weed stocks are crashing again
All the dreams of a sustained cannabis comeback are quickly getting dashed, and the sell-off is so sharp that the sector’s hardcore supporters have to wonder whether the endless roller coaster is worth it. Tim Kiladze reports.
This TSX stock has been putting even Shopify’s returns to shame over the past three years
The dizzying climb in share price of Shopify Inc. that has made it Canada’s most valued stock may have many assuming the tech giant was the unrivalled leader for investment returns over the past few years on the Toronto Stock Exchange. That would be a false assumption. The stock with the greatest total returns over the past three years actually belongs to a largely low-profile mid-tier mining and exploration company that’s not in the S&P/TSX Composite Index and is followed by just a single analyst. And it isn’t the only player in the centuries-old mining sector that has produced outsized returns at a time when flashy, fast-growing tech stocks have often dominated the market’s attention. Darcy Keith reports on the latest list of TSX stocks with the greatest total returns over the past three years.
Clashes over taxes, debt limit challenge rally in U.S. stocks
Investors are ramping up their focus on Washington, as the twin prospects of a tax hike and a potentially prolonged fight over raising the debt ceiling loom over a rally in U.S. stocks.
Fading retail demand for U.S. stocks could hit S&P 500: Vanda Research
Retail investors’ appetite for U.S. stocks has fallen in the past week, data from Vanda Research showed on Wednesday, increasing the odds for a broader sell-off in the S&P 500 at a time when it is already about 2% off its record high.
Ontario regulator says rule reforms not meant to stop banks selling third-party mutual funds
Ontario’s securities watchdog says new regulations that will soon require advisers to have deeper knowledge of the funds they recommend to clients should not have prompted banks to halt the sale of third-party investment funds. Clare O’Hara reports on the latest developments in this saga.
Also see: TD Bank says plan to halt sales of third-party funds will have minimal impact
Reddit squeeze goes nuclear, boosting uranium-related investments
A speculative rally fuelled by Reddit is juicing the price of uranium and investments with exposure to the commodity, leaving investors and companies alike wondering how long the run will last. Niall McGee reports.
More on ETFs:
REIT ETF picks to benefit from the shift to hybrid work
Is cheaper better when it comes to picking ETFs?
Five ETFs for investors looking to bet on the infrastructure boom
Others
Number Cruncher: 15 Canadian value stocks with great potential
Number Cruncher: 10 TSX-listed stocks give you geographical diversification (without leaving home)
Wednesday’s analyst upgrades and downgrades
Tuesday’s analyst upgrades and downgrades
Billions blown as Macau casino investors fold amid gambling review
CPPIB-backed Sportradar valued at nearly US$8-billion in Wall Street debut
NYSE says to co-launch new, environmentally sustainable asset class
Globe Advisor
Market jitters herald return of low-volatility ETFs
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Ask Globe Investor
Question: I have just changed my RRSP into a RRIF. At this point, my husband and I don’t need the extra money that I can access in this account. What I would like to do, instead, is transfer stock shares out of the RRIF account and put them in my tax-free savings account. I would like to do this instead of putting in the allowed yearly $6,000. I realize I would only be allowed the equivalent of $6,000 with my transferred shares. Is this doable?
Answer: Sorry, this idea won’t fly. You can’t transfer assets from a registered retirement income fund or a registered retirement savings plan directly into a TFSA. If you could, everyone would do it because RRSP/RRIF withdrawals are taxable whereas those from a TFSA are not.
The only way to do this is to make an in-kind transfer of the shares to a non-registered brokerage account and be assessed tax on the value withdrawn from the RRIF. Then you could transfer the shares into a TFSA.
The bottom line is that any RRSP/RRIF withdrawals in any form are taxable.
--Gordon Pape
What’s up in the days ahead
Rob Carrick looks at the performance of Canada’s first retirement ETF on its first anniversary.
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Compiled by Globe Investor Staff