iShares DEX All Govt Bond ETF (XGB.TO)

High-quality exposure to Canadian federal and provincial bonds. Lots of liquidity. If we get a growth shock and things get a little wobbly, bonds tend to do really well. Seeing big cross-border flows coming into Canada, especially in the bond market -- likely due to Canada's resource exposure. International money is seeing Canada as a pretty safe place to put their dollars.

If you've been feeling uncomfortable since October with tech exposure, it might be time to get your risk right and incorporate some bonds as ballast. Gives you flexibility to rebalance and a real yield.

Disclosure:  Owns this for clients via the futures market. Though he may own similar exposure at times, he doesn't own the individual ETF. His team creates the exposure in a different way.

Following a disastrous 2022 for bonds, early 2023 was a good time to start buying into this, namely Canadian government bonds. Headwinds have been the last leg of fighting inflation--getting inflation down has been tough. He now thinks interest rates will go down, but not as fast as the street believes. Still owns this, which will do well when rate cuts come.

Very simple, direct route to playing bonds VGB holds more than 50% in federal bonds and the rest provincials. It pays a dividend yield of 2.8%, but much higher than 12 months ago. Yields are up. If the economy enter recession, government bonds will give you capital appreciation. Warning: if inflation sees a resurgence, bonds will bite you. Be nimble.

(A Past Top Pick on May 23, 2018, Up 1%) He's preserving capital. Bonds are seasonal in May to start of October, because investors want safety from incertainty. The chart doesn't look pretty with a downtrend, but he likes bonds now.

A contrarian view. Bonds have a seasonal peak especially between August and September. He does not expect a Bank of Canada interest rate increase soon. Yield 2.5%.

How will this and XCB be affected by a possible interest rate hike? He is not sure that if the Bank of Canada raises short rates, it will have a huge impact in Canada. The bigger question is what the Federal Reserve is going to do with their bond portfolio. If they start to focus on the longer part of the yield curve, that is going to be a negative for Canada. He would prefer corporates over governments. Hang on to XCB and use this one to go into another part of the market, such as a preferred share ETF, or look into the US market.

Right now this looks like a trading vehicle. Its profile is starting to change where it looks like it has some pretty good upside so right now you could look at it as both a trading vehicle and an investment vehicle. It’s at the top of the rank on his weekly tables but at the bottom on his monthly tables, so is just starting to become an investment idea.