BMO Short Term Provincial Bond ETF

ZPS-T

Analysis and Opinions about ZPS-T

Signal
Opinion
Expert
COMMENT
COMMENT
August 20, 2019
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.
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.
Daniel Straus
Head of ETF Research & Strategy, National Bank Financial
Price
$13.430
Owned
Unknown
COMMENT
COMMENT
November 17, 2009
Short Term Provincial Bond ETF. Safer than corporate and more zip than federal but not significantly so. He would still prefer the corporate side.
Short Term Provincial Bond ETF. Safer than corporate and more zip than federal but not significantly so. He would still prefer the corporate side.
Mark Carpani
Senior Vice President, Ridgewood Capital
Price
$15.110
Owned
Unknown
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