Claymore’s #1 and #2 ETFs by assets under management are the Claymore 1-5 Year Laddered Corporate Bond ETF (TSX: CBO) and the Claymore 1-5 Year Laddered Government Bond ETF (TSX: CLF). So, it’s not very surprising that Claymore’s two newest ETFs are similar products moving up the yield curve. The Claymore 1-10 Year Laddered Government Bond ETF (TSX: CLG) and the Claymore 1-10 Year Laddered Corporate Bond ETF (TSX: CBH) started trading on the TSX today.

The Claymore 1-10 Year Laddered Government Bond ETF (TSX: CLG) holds 53 bonds with maturities ranging from 1 year to 10 years issued by the Federal and Provincial Goverments. The laddering strategy is implemented by reinvesting maturing bonds in a new 10 year bond. The MER of the ETF is 0.17%, the yield-to-maturity is 1.82% and the duration is 4.36 years.

The Claymore 1-10 Year Laddered Corporate Bond ETF (TSX: CBH) holds 56 investment grade corporate bonds with maturities ranging from 1 year to 10 years. The MER of the ETF is 0.28%, the yield to maturity is slightly higher at 2.79% and the duration is 4.14 years.

One or both these ETFs will be of interest to investors looking for broad exposure to the bond market. The duration (a measure of the sensitivity of bond prices to interest rate changes) of both these ETFs is higher than the iShares DEX Short Term Bond ETF (TSX: XSB, MER: 0.27%, YTM: 1.68%, Duration: 2.61) and lower than the iShares DEX Universe Bond ETF (TSX: XBB, MER: 0.32%, YTM: 2.57%, Duration: 6.43). But the MERs are quite a bit lower than both iShares ETFs and you can lower the cost of owning even further if you can buy these ETFs without a commission.

A couple of points to note: despite the name, the Claymore Laddered Bond ETFs are not quite the same as a bond ladder an investor could construct herself because unlike a ladder, the investor has no control over reinvesting maturing bonds in the ETF. Therefore the ETFs are only suitable holdings for long-term investors who are will be reinvesting maturing bonds indefinitely. Also note that the cash yield of these ETFs is quite a bit higher than the YTM, which all things being equal implies that the ETF will experience a drop in the price level over time.

This article has 8 comments

  1. Thanks for the review, CC. Doesn’t it seem to you that the yield to maturity on these funds is only trivially better than those of CBO (2.50%) and CLF (1.59%)? I don’t think I’m prepared to double the duration of my bond holdings to get 20 or 30 basis points more in return.

  2. @Canadian Couch Potato: CLF/CBOs duration is 3 years. Unfortunately jumping from 3 to 4 years gets us just 20 basis points or so these days. Because interest rates are so low, 20 bps on 1.59% is still 12.5% more in yield. I don’t know how that stacks up against the “normal” yield curve but if one wants a longer duration then these new ETFs will be of interest. I prefer to keep duration very short because my asset allocation is very aggressive so I’m not willing to take risk on the bond side by going for a longer duration either.

  3. I like these new products although I am still sticking to my XBBs for now. There is very little float outstanding so you’ll be buying directly from Claymore.

    Are the YTM before or after the MERs?

  4. @Thomas Venner: The problem with savings accounts is that interest rates are not guaranteed. Also, it is not easy to get high interest savings within RRSPs. The spread between savings accounts and bonds is not always this low.

    @Sean: The YTMs are before MERs unfortunately.

    • I sent a message through contact section but no response, please remove my post above ASAP for compliance reasons.

  5. I’d have trouble buying CLG… the yield is simply too far below the current inflation rate to make sense as an investment.

    Is anyone else considering no longer adding new money to the bond portion of their portfolio, or diversifying into much riskier bonds (junk or emerging market debt)? I realize junk has stronger correlations with stocks than regular government bonds. We’ve had a good run in government bonds, but I feel very worried about buying more bonds at this point.

    • @Viscount: I find that I’m not buying bonds these days either. It’s not driven by valuations but simply a result of stocks being lower than my target because of a drop in stock prices and a gain in bond prices.

  6. Most sites have Corporates with a less than 5 year maturity that you can but direct, to which you add about 10% High Yield and about 10% Realty Trusts, Bond ETF’s are not necessary, control your own assets.