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The elevated level of household debt in Canada the highest among the major industrialized economies will amplify the impact from the interest rate increases. Going forward, longer-term interest rates are more likely to decline meaning bond prices rise.


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Stocks and corporate bonds rise and fall in tandem. The Fund is actively managed to better protect investors during periods of rising interest rates. It is the only fixed income Fund in Canada of its kind and offers unique diversification for portfolios that already own stocks and corporate bonds.

As valuations in stocks and corporate bonds approach historically high levels, AAA-rated Government of Canada bonds provide very effective, low-cost insurance for investment portfolios. This report is produced entirely by Caldwell. Caldwell will furnish upon request publicly available information on which this report is based. This is not an offer or solicitation of an offer to buy or sell any security investment or other product.

The information contained in this document is designed to provide general information related to investment alternatives and strategies and is not intended to be investment or any other advice applicable to the circumstances of individual investors.

Editorial Reviews

We strongly recommend you to consult with a financial advisor prior to making any investment decisions. Unless otherwise specified, information in this document is provided as of the date of first publication and will not be updated. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing in this product.

4 common risks for bond investors

Unless otherwise indicated, rate of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any security holder that would have reduced returns. Mutual funds are not guaranteed; their values change frequently and past performance may not be repeated.

The Caldwell Income Fund is a publicly offered mutual fund that offers its securities pursuant to a simplified prospectus dated July 20, January Bond Strategy Update. A common option is a call feature. Callable bonds often provide investors higher yields versus non-callable bonds to compensate them for the additional risk associated with a call.

An issuer would typically call a bond if rates are lower and it is advantageous to them to reissue new debt at a lower obligation.

Bond Strategy Update | Caldwell Investment Management Ltd.

Some bonds have a convertible feature , allowing the holder to convert the bond into stocks of the company. Redemption provisions such as calls at the issuer's option, tenders, sinking funds or extraordinary redemptions, provide the issuer an option to repay principal prior to maturity and may change the term of the investment which may affect price or yield calculations.

If this security has a zero coupon, then it will be redeemed at the accreted value. Brokered CDs also generally include an estate protection feature. Original Issue Discount OID securities are issued at a price less than the stated redemption price at maturity. OID may be deemed interest income and may be reportable for tax purposes as it accrues whether or not you receive any interest payments from the issuer during the year.

Please consult with your tax advisor regarding specific OID tax treatment. Purchasing Power Risk is the risk that, over time, inflation will lower the value of the returned principal. This means that an investor will be able to purchase fewer goods and services with the proceeds received at maturity.

Understanding and managing the risk of bonds

Coupon adjustments may not reflect changes in interest rates. When investing in a step-rate security, you may be accepting lower yields initially than comparable fixed-rate securities in return for the potential of receiving higher yields over the life of the investment. However, there is a greater likelihood that the issuer will call these bonds when prevailing interest rates are lower than the current coupon. This may affect the yield on the security. Interest payments may fluctuate.

Variable rate bonds provide the holder with additional interest income if the underlying rates rise or with reduced interest income if the rate falls. Zero coupon bonds may have higher price fluctuations since there are no regular interest payments. These are bonds issued at a deep discount. The redemption is for the full face value making up for the lack of periodic interest payments through a lump sum payout at maturity.

Foreign bonds are subject to additional risks, including without limitation, liquidity, currency fluctuations, differing accounting standards, political and economic instability, and differing tax laws. Brokered Certificates of Deposit CDs purchased through a securities broker and held in a brokerage account are considered deposits with the issuing institution and are insured by the Federal Deposit Insurance Corporation FDIC , an independent agency of the U.

The deposit insurance coverage limits refer to the total of all deposits that an account holder has in the same ownership categories at each FDIC-insured institution. Brokered CDs are redeemable at par upon death of beneficial owner. Only the par not the premium paid is FDIC-insured. Each insured institution is assigned an FDIC certificate number which appears on trade confirmations and statements. The FDIC certificate number is important because mergers and acquisitions may lead to the consolidation of multiple institutions under the same certificate number, thereby reducing your insurance coverage if you held deposits at each of the consolidating institutions.

Additional information is available from the FDIC at www.


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Corporate Bonds are debt obligations issued by U. In most instances, the issuing company also agrees to pay interest to investors. Payment of principal and interest is the obligation of the issuer. These securities are also known as agency securities. Although they are not guaranteed by the U.

Bond Portfolio Investing and Risk Management

They are subject to market risk if sold prior to maturity. Mortgage-backed securities and Collateralized Mortgage Obligations CMOs are priced based on an average life which includes prepayment assumptions that may or may not be met and changes in prepayments may significantly affect yield and average life. The actual maturity date may be shorter than stated. Mortgage-backed securities are generally regarded as higher yielding investments with relative safety of principal when issued by one of the Government Sponsored Enterprises GSEs.

However, the potential reward of higher yields is dependent on the predictability of timing the return of principal contingent upon the cash flows from the underlying mortgage pools, as homeowners have the option of prepaying their principal at any time. Tax-Exempt Municipal Bonds are issued by state and local governments as well as other governmental entities to fund projects such as building highways, hospitals, schools, and sewer systems.

However, bonds may be subject to federal alternative minimum tax AMT , and profits and losses on bonds may be subject to capital gains tax treatment. Municipal securities may lose their tax-exempt status if certain legal requirements are not met, or if tax laws change.


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  • Taxable Municipal Bonds are issued by state and local governments as well as other governmental entities to fund redevelopment districts, stadiums, pensions and utilities. Interest or other investment return is included in gross income for federal income tax purposes and may also be subject to state and local income tax. A municipal security may be issued on a taxable basis because the intended use of proceeds does not meet federal tax law requirements for the exclusion from gross income, because certain other federal tax law requirements are not met, or because the issue qualifies for a tax credit or subsidy.

    Investors interested in regular updates about individual municipal securities can sign up on EMMA emma. These documents can include annual and other periodic financial filings, operating data and other types of material events. For more complete information about new issues, including charges and expenses, obtain a prospectus or municipal official statement from your Financial Advisor. Alternatively you can access this information on sec. Please read it carefully before you invest or send money. Preferred securities present a greater risk because they are generally subordinate to debt in liquidation priority.

    Preferred securities are quoted on either a current yield basis, or a yield-to-call basis if trading at a premium. For preferred securities that pay dividends, the dividend is paid at the discretion of the board of directors and holders generally do not have voting rights. Preferred dividends may be cumulative or non-cumulative. Some preferred securities may have a deferred interest feature, which allows the issuer, in certain circumstances, to defer payments between 5 to 10 years or longer depending on the security.

    The deferred income will generally accumulate, and may be considered as ordinary income for the year in which it is accrued, even though the holder of the security receives no payment until the issuer reinstates interest payments. If deferred, the ability of the issuer to reinstate interest payments is subject to the creditworthiness of the issuer.