iShares DEX Short Term Bond (XSB.TO)

The fixed income of people's portfolios is severely impaired. In this ETF the distribution is the coupon earned and not the yield to maturity. The distribution is higher. He would prefer short term corporate bonds, XCB-T.

In his institutional mandates, he has to have a minimum of 30% in fixed income, and he is not particularly positive on bond returns over the next 12-18 months, as he expects longer-term interest rates to start rising. In his case, he has 7.5%, and 30% is in the short-term bond index XSB-T. He is using that to reduce the duration of that bond portfolio. In this case, about half the bond portfolio is in the US in the fixed income market, with the other half being in Canada split evenly between the bond index XBB and XSB on the short term.

Seasonality around fixed income is inverse to equities. So buy in May and go away in the fall if not holding for the long term. You get a lot of your own money back in their yield. You have to look at the yield to maturity, not the coupon.

(A Top Pick Aug 30/13. Up 3.04%.) Very broad and diverse. He likes that there are about 240-250 different bonds in it. Never trust yield. Take a look beyond the 1^st page where it gives you the quote, and look at what its “yield to maturity” is. That is what you are actually getting.

It is such a challenging time. XSB is a short term bond index. Good, low cross product, but pretty tough to make money in this environment. Even if rates don’t go up, you won’t make much money. A daily interest savings account might be just as good.

This is the grandfather of all the bond ETFs. Likes this because durations are short, about 2.7 years.

Bond ETFs for an RRSP? The granddaddy of them all is the XSB-T. About two thirds government and one third corporate and is all investment grade. Bank of Montréal and horizon also have some very interesting income-based products as well.