BMO Emerging Mkts Bond Hedged CAD (ZEF-T)

Good fixed income play in a diversified portfolio? EM bonds give higher return at higher risk. For a younger investor with 70% equities and 30% fixed income, wouldn’t have more than 5-6% in EM bonds. Funny things can happen in terms of valuation and nationalization.

ZEF-T vs. ZHY-T. The question is credit risk. You have emerging market risk with ZEF-T and so you get extra yield. When you do the correlation of the higher yield, they trade more like an equity than a bond. ZEF-T is an equity type risk, where as ZHY-T is more like fixed income. He does not think it is the time to step into either of these.

Some conservative ideas for the next recession ahead for a senior? He would suggest this one, a BMO emerging-market bond ETF. Growth is really anemic in the West and bond yields in the US and Canada are 2% over 20-30 years, but bond yields in other parts of the world are 5%-6%. You’re taking on the little more volatility, but getting a lot more yield.

Basically, a hedged version of the emerging markets bond strategy. Emerging markets dropped quite quickly when Trump won the election, and that was when he bought emerging-market bonds. With these, you want to be a little careful as to when you hold them and when you don’t. A lot depends on what is happening in that part of the world on currencies, etc. This pays a pretty decent yield of 4.5%+. You have to be a little more active in this area.

Emerging market bonds had a rough 4^th quarter, but in the past 2 or 3 months, they’ve at least held their own. It is very difficult to make money in bonds these days. If you can keep up with inflation with your bond position, you are probably doing as well as you can reasonably expect.

If you believe that you want to have bonds, or need to have them, emerging markets will give you a bit of a yield that will give you more jazz than what you would otherwise have.

The whole bond space has been hurt substantially since May 22^nd, when rates started creeping up. Prefers iShares Emerging Market Div (DVYE-N) but he got stopped out of this. He would take a look at getting back into this one. On the ZEF, he would want to know how much of it is corporate versus government, preferring to be a little bit more on the corporate side.

(A Past Pick Nov 28/11. Up 4.1%.) (BNN showed this as a Top Pick Aug 2/12. Our records show iShares US High Yield Bond Index ETF (XHY-T.) was the Top Pick Aug 2/12. – Bill.) Has liked this for a long time. Sold his holdings when he thought this would be vulnerable.

Prefers VEE-T. Emerging market bonds are a sexy way to go.

Emerging-market equities over bond funds? He likes both. You should have a certain percentage in both bonds and equity so you should decide how much is allocated towards emerging markets.

Likes it very much. Great yield - 6%+. Big fan of that category. A long-term buy and hold scenario.

Likes this one a lot even though he doesn’t like bond ETFs very much. This one is somewhat immune to the current interest-rate environment because the interest-rate cycles in emerging markets are not as punitive and rates are not as low. This will be a little more volatile.

Bonds are one of the ongoing conundrums that advisors have and have had for the past 3-4 years. Feels the credit risks on emerging-market bonds is quite modest and yields are higher.

If you want access to emerging-market bonds, this is the way to go but he doesn’t do any of this because he would much rather be writing a Call on Canadian banks than he would on emerging-market bonds.