Fixed Income Investment options?
One RFDer asked me about fixed income investments. Not sure why - I am just another amateur investor trying to manage our retirement savings. Anyway, I wrote this in response, partly as a reminder to myself!
It's always good if your fixed income can guaranty a relatively risk free return of your capital. GICs, Fed/Provincial bonds provide that.
This RBC link provides an idea of GIC yields: https://contact.rbc.com/gicrates/index.php
Even although GIC yields have dropped recently, I would still look at a GIC ladder for part of your funds. Yields are 4.26-4.5% Not a bad time to start a ladder because in more normal times, shorter terms have lower yields.
FEd/Prov bonds are here: https://www.rbcdirectinvesting.com/pric ... bond-rates . Not that enticing, at least for me.
Then there are corporate bonds. With these credit rating needs to be checked. Banks for example could be rated AA, REITS BBB. Inventory depends on who you trade through. Had a quick look, and not many offer much better yields than GICs do. There are a few with yields in the 5+% range that could help boost overall FI yields, albeit with some added risk.
Another type that I have used, are Partners Value split shares. With these spit corporations, Brookfield own all of the capital shares and the preferreds get sold to the public. These have a fixed maturity date on which, like a bond, you get back the par value. You can find these in the split share section here: https://advisor.scotiawealthmanagement. ... 0-2023.pdf
These split pfds are trading at a discount to par so the total return at maturity is quite good (6.3-6.7%). Current yields on price just under 5%. I have some of these, bought when price was higher
PVS.PR.F ; PVS.PR.I ; PVS.PR.G ; PVS.PR.H ; PVS.PR.J ; PVS.PR.K
So far as preferreds in general are concerned, I think they look quite good. Liquidity can be an issue, but only if you are in a rush to buy or sell.
I have bought a number of perpetuals yielding ~6% on price at prices well below par. As interest rates drop, these should increase in value. (or the reverse if interest rates go up!). I have no plan to sell. 6% in perpetuity from a low risk source is good for me late in retirement!
I have also bought rate resets or minimum rate resets that are due to reset very soon. They will reset at the quoted spread plus the GOC5 5yr Benchmark rate. Right now it is at 2.88% down from 3.06% Dec 6th. I wouldn't go with any with low spreads that will reset too far down the road except perhaps for those that recently reset for 5 years at high yields.
This link is a little old, but still provides some good pointers on the current Preferred market: https://www.raymondjames.ca/branches/pr ... report.pdf
It's always good if your fixed income can guaranty a relatively risk free return of your capital. GICs, Fed/Provincial bonds provide that.
This RBC link provides an idea of GIC yields: https://contact.rbc.com/gicrates/index.php
Even although GIC yields have dropped recently, I would still look at a GIC ladder for part of your funds. Yields are 4.26-4.5% Not a bad time to start a ladder because in more normal times, shorter terms have lower yields.
FEd/Prov bonds are here: https://www.rbcdirectinvesting.com/pric ... bond-rates . Not that enticing, at least for me.
Then there are corporate bonds. With these credit rating needs to be checked. Banks for example could be rated AA, REITS BBB. Inventory depends on who you trade through. Had a quick look, and not many offer much better yields than GICs do. There are a few with yields in the 5+% range that could help boost overall FI yields, albeit with some added risk.
Another type that I have used, are Partners Value split shares. With these spit corporations, Brookfield own all of the capital shares and the preferreds get sold to the public. These have a fixed maturity date on which, like a bond, you get back the par value. You can find these in the split share section here: https://advisor.scotiawealthmanagement. ... 0-2023.pdf
These split pfds are trading at a discount to par so the total return at maturity is quite good (6.3-6.7%). Current yields on price just under 5%. I have some of these, bought when price was higher
PVS.PR.F ; PVS.PR.I ; PVS.PR.G ; PVS.PR.H ; PVS.PR.J ; PVS.PR.K
So far as preferreds in general are concerned, I think they look quite good. Liquidity can be an issue, but only if you are in a rush to buy or sell.
I have bought a number of perpetuals yielding ~6% on price at prices well below par. As interest rates drop, these should increase in value. (or the reverse if interest rates go up!). I have no plan to sell. 6% in perpetuity from a low risk source is good for me late in retirement!
I have also bought rate resets or minimum rate resets that are due to reset very soon. They will reset at the quoted spread plus the GOC5 5yr Benchmark rate. Right now it is at 2.88% down from 3.06% Dec 6th. I wouldn't go with any with low spreads that will reset too far down the road except perhaps for those that recently reset for 5 years at high yields.
This link is a little old, but still provides some good pointers on the current Preferred market: https://www.raymondjames.ca/branches/pr ... report.pdf