Bond yields have been ravaged in 2019. The Canadian yield curve inversion sunk to its lowest level since 2000 this month. Collapsing yields have driven up prices, which means investors should take a second look at bond ETFs as we look to the end of the summer.
Bonds are emerging as an attractive target, along with precious metals, as the likelihood of a global recession grows in the face of an intensifying trade war.
The iShares Canadian Government Bond ETF (TSX:XGB) seeks exposure to Canadian investment grade government bonds with maturities of at least one year. Shares of the fund have climbed 8% in 2019 as of close on August 27. If this holds, it will stand as the best annual return since 2014.
Some of the top holdings in the ETF include Government of Canada and Province of Ontario bonds, which made up more than 50% of its total weighting. At nearly 25% total weighting are the Canada Housing Trust No. 1 bond and the Province of Quebec bond. Over 25% of its holdings boast maturities of 20+ years.
Investors should bet on continued turbulence as the U.S.-China trade war ramps up into the fall. On this front, there appears to be little chance of reconciliation in 2019. I still like this bond ETF in late August.
