How the governments rescued the global credit crisis has come home to roust as sovereign debt problems. This will be a test of the market’s willingness to assume risk. The risk appetite in Canada has returned to the bond market. Spreads are approaching near normal conditions.

Zero to negative total return this year expected.

Canadian Banks. For some banks, the common is actually higher than the bond, which concerns her – is there a dividend cut coming (unlikely). It’s a case of how profitable the US banks will be with the new rules.

Bond fund managers are looking to avoid those parts of the yield curve that will be hurt the worst with the anticipated interest rate increases.

Morgan Staley senior 2/23/2017, 4.9%. Almost 2% more than equivalent Canadian bond. They are a leader in the financial services market. Changes in the financial industry will actually be helpful to bond holders.

Rates are rising in 10-year gov’t of Canada bonds. She likes the 7-10 year range. Corporate bonds offer 1-2% above these. A bond portfolio will look like the yield of the portfolio at the end of the year [I think she means no capital gain/loss]. Short-term bonds will likely decline.

GTAA 4.85% 6/1/2017. An infrastructure bond. They are not-for-profit and pass costs on to the airlines. This issue should see an improvement in their revenues if you believe the economy is bottoming and starting to improve.

Passive ETF. It is the broad corporate universe. More interest-rate sensitivity, but higher yield.

Passive ETF. Laddered 1-5 year bonds, equally. Lower yield and less interest rate sensitivity.

(Top Pick Apr 13/09, Up 8.4%) Wells Fargo 4.45% maturing Feb 28/11. Achieved the returns she expected and sold them.

(Top Pick Apr 13/09, Up 30.5%) Bank of Montreal Capital Trust 10.221% maturing Dec 31/18.

(Top Pick Apr 13/09, Up 9.4%) Government of Canada Real Return Bonds. 4% maturing Dec 1/31. . Achieved the returns she expected and sold them.

This is down the risk spectrum so you get paid for taking on the risk (8-9%). This has a shorter term to maturity. They do not withhold tax. It’s an attractive asset space.

An active portfolio manager. (She is also an active portfolio manager so this is her competition. Why not deal with her instead? Bill.)

An ETF that is designed to track the index of the US high yield market. The yield is anywhere from 9% to 10%. There is also currency risk attached to this because it is in US$. You have interest rate volatility and credit risk associated with it along with a currency risk. You are better off with a very strong fixed income active manager.