A Comment -- General Comments From an Expert (A Commentary)

Not such a good place for bonds with maturity less than 5 years. Mortgage rates wont fall much more. You wont see a significant drop in mortgage rates from here.

Strip Bonds: Don’t mind the provincial space but this is a long-term investment. There is a lot of risk in that increased investment term. You will get some descent yields.`

There will be more interest rate hikes, not at the rate the market expects. The market is already priced at the short tend. Growth will be low and inflation will go down. Royal and TD are good bonds. 10 years and out.

Is it inflation or deflation? He is in the disinflation camp. Fixed income will perform well. Expects lower growth.

Merrill Lynch 5.29%. Low end of where he is putting money. Majority of problems are behind them. A strong franchise. 6.5% on this bond.

Is it a good time to get into long-term Canadian bonds? He doesn’t have a problem but you need to watch them closely. Do your homework. Expecting a low inflation environment for the next year.

The loonie may be back to parity by the end of the year.

There is a recovery underway with a growth of 3-4% in the next year or so. Consumer confidence has been affected by the weak job market. All over the world we have deflation going on. This is good for bonds. Spread between corporate and government has increased. Canada exports 9% to the Euro zones. You should not be shortening term, but lengthening term. Anything past 4 years is the sweet spot.

Real Return Bonds: The first thing you need is inflation and the second is higher yield, so there are not the place to be right now.

Barbell Strategy: Half money in 30-day treasury and half in 30-year bonds. Every 30 days to get half your principle back to re-invest. He sticks to laddered portfolios.

Corporate Bonds: He favours them in North America. They offer an even more attractive yield in the last couple of months. 3-8 or 10 year term. Favours non-cyclical companies. No more than 10% in any one name.

Step Up Bonds: Pay you a certain rate for a certain time and then it steps up. If rates fall then will call them and you have to re-invest. If they rise, then you are stuck with them.

Loonie: Will edge up toward parity. Exporting companies get used to dealing with a stronger loonie. People have to be prepared for it to be beaten up because it is only 3% of the currency in the world. It is one of the currencies that world banks turn to when they want to diversify.

Dividend-Paying Stocks: Likes high dividend paying stocks. Seldom do they yield more than bonds, like they can now. Would rather own common than preferreds. Certainly would have some dividend paying stocks in taxable accounts.

Bond prices and interest rates move in opposite directions. Don’t put all your money in one bond. Spread it out with a laddered approach. Likes a 1 to 7 year ladder. Interest rates should go to 2% in next 12 months (Bank Rate).