ghariton wrote: ↑
08 May 2017 16:26
FWIW, TD Waterhouse is showing a price of $189.38 for the 2021 RRBs. That's the bid price. For the ask price, you have to build in the spread, typically around one and a half per cent.
[Deleting previous bit asking about the price... you must own this and can see the price that way.]
It's only my speculation, but I feel that the markets plus a low Canadian dollar have given us Canadians a gift as I look to enter a semi-retirement phase. Consequently, and only because of the unexpected relatively rapid rise in our portfolio over the past year, I'm back to contemplating locking-in at least some gains through RRBs. Not long ago, I looked at RRBs as overvalued, and they probably still are relative to, say, GICs, but retirement scenarios have changed some of my planning strategies. It may sound strange to many that a 0% or even slightly negative return with an RRB ladder is "locking in" anything, but I suspect fixed income will provide negative returns in the coming years and equities will provide smaller gains, meaning even tracking 0% real with a balanced portfolio could become a challenge. I certainly hope not, but retirement is a different kettle of fish. Also, looking at the 1970s, for example, cash and bond rates can lag inflation for several years. Short GIC ladders could lag inflation dramatically for several years. Most importantly, I can leave things as they are and take my chances with market variances, or I can insure at least part of the portfolio. The plan would to use an RRB ladder with a short-term GICs in the intervening years. I'm not sure yet on valuation yet -- e.g., should the RRB rung be at the same amount initially, but that's partly limited by available funds anyway.
What I don't like is what I've always not liked about RRBs -- essentially mid- to long-bonds with an extra inflation component. I like the inflation component, hate the rest of it. I also don't like that they are premium bonds, with coupons paid out (TD never has strips), meaning the coupon should
being rolled into a similar vehicle, but it really can't be. Anyway, gotta take the good with the bad, I suppose. I realize that the long bond component could mean these, on any given day, badly lag inflation. But I can't get around the diversification benefits. Maybe a year ago, I could ignore them, but I've come full circle