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I am looking at adding PH&N bond fund, as well as Claymore 5 year laddered bond ETF (both government and corporate) plus or minus the iShares short bond ETF to my RRSP over the year.
Given that interest rates are bound to rise, will these funds/ETF's decrease in value as rates rise? Is it better to wait to buy bonds nowadays?
 

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I am looking at adding PH&N bond fund, as well as Claymore 5 year laddered bond ETF (both government and corporate) plus or minus the iShares short bond ETF to my RRSP over the year.
Why so many funds? All you are doing is making matters more complicated than need be. Pick one general fund and stick with that or in the case of the Claymore products both the gov't and corp. laddered bond ETFs if you feel you want/need exposure to both types of bonds.

Given that interest rates are bound to rise, will these funds/ETF's decrease in value as rates rise?
Yes, but not necessarily equally.

Is it better to wait to buy bonds nowadays?
Well that's the $64000 question, isn't it? If you know for sure that rates across the entire yield curve are going to rise substantially in the near future then you wait. But we don't know this as there is no guarantee what will happen to medium and long term rates, corporate rate spreads, etc. even in the face of rising short term rates as set by the BoC. A reasonable compromise would be to average into the bond fund(s) of your choice so as to mitigate the effects of being wrong with your guesses about future interest rate moves.
 

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I understand that as interest rates rise, the share value of bond funds will fall, but is there any way to predict how much the share price will fall in response to a given rate increase?

For example, if the overnight lending rate were to rise 2% over the next year, is it possible to estimate the % drop we would see in the CDN bond index?

Any info on this would be very much appreciated!
 

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The rough and dirty calculation is to multiply the change in interest rate by the duration of the bond (fund). Where this falls down a bit in practice is that a 2% change in the overnight rate won't necessarily result in a 2% change across the yield curve so the effect on a bond fund will be different than that. Because the yield curve is currently very steep, a 2% change in the overnight rate won't likely have near that sort of impact on the long end of the curve thus the change in the unit value of a bond fund will likely be quite a bit less than that.
 

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Since the rise of interest rates seems to be a sure thing is it a good idea in general to invest in bond ETF's at this moment?

I was looking at XSB since its a short term bond fund which would have less impact on the yield curve when rates rise but still not sure whether its a good idea or not?

Any comments?
 
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