Assessing the damage of rate hikes on Canadian bond funds

The impact of the Bank of Canada's decisions has been swift.

Jeffrey Bunce, CFA 14 September, 2017 | 10:00PM
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Jeffrey Bunce: It's been about three months since the Bank of Canada started signaling its intention to raise interest rates, two months since the first hike on July 12, and a little over one week since the second hike on Sept. 6. Even though these are shorter time periods to be looking at, the impact from the rate decisions has been swift. To see this, we can examine the broad-market Canadian bond ETFs from iShares, BMO and Vanguard. As a barometer for the Canadian bond market, these ETFs have each fallen a little over 3% since their peak in early June through Sept. 11. The Vanguard ETF has fared a bit worse than the iShares and BMO ETFs owing to it tracking a different reference benchmark, which possesses more government bonds and a slightly higher duration.

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About Author

Jeffrey Bunce, CFA

Jeffrey Bunce, CFA  Jeffrey Bunce, CFA, is a senior investment analyst for Morningstar’s Investment Management group.

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