Larry Berman CFA, CMT, CTA BMO Short Term Provincial Bond ETF ZPS-T WEAK BUY Feb 10, 2020

Short Term Provincial Bond ETF. Safer than corporate and more zip than federal but not significantly so. He would still prefer the corporate side.

When rates go up, bonds prices fall, and vice-versa. Because this is on the short end of the spectrum it's less sensitive. BMO has a grade of 9 products for the 3 major exposures (corporate, provincial and federal bonds) and the 3 major terms lengths (short-term 0-5 years, medium-term 5-10, and long-term 10 and above). BMO's aggregate bonds until recently, ZAG, was made up by mixing those 9 products, they've started to unwrap that and now they owns the bonds directly. You need to look at the yields to maturity and total return chart. Many bonds are trading at a premium of their par-value, and if this ETF is rolling those bonds its net asset value is going to decate over time even if you are collecting a coupon that compensates you for that. So not very tax-efficient. ZPS is probably one of the better ones since it doesn't have those medium or long-term bonds. Provincial bonds are in between, they have medium risk in the world of fixed-income investing. For a core bond holding you might want to have ZAG which has a 7-8 year duration and mix in a little bit of the short-term. Maybe a little too sensitive to interests rate but not the case if you are banking on them falling and you want to participate in the price appreciation.