Bond ETFs losing value

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With the BofC rate cut already and another 1/2 point cut very likely why are Bond ETFs like ZPL and TDB dropping in value. I understand that some information regarding inflation out of the USA is a little unclear or contradictory I don’t understand the relationship with that and ZPL which is a provincial bond ETF

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Asked on October 21, 2024 12:55 pm
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Generally if you see bond prices fall while rates fall, it is a sign that the market doesn't really believe rates will stay low for long.

If investors believe that the rate cut is temporary and rates will rise again soon (to counter inflation, for instance), they might be reluctant to hold bonds with lower yields. This expectation can lead to selling pressure and declining bond prices.

This is exactly why we saw rates fall by 50 basis points today but the 5 year Canada bond yield actually went up.

The bond market is an actively traded market, much like stocks. So, they're pricing in what they believe will happen in the future.

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Posted by Dan Kent
Answered on October 23, 2024 4:29 pm
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