(3) In their last actuarial valuations, Canada's largest public-sector DB pension plans all used real discount rates for funding purposes that were well above government long-term bond yields, assuming a premium ranging from about 2.5 percentage points (for the Ontario Teachers' Pension Plan) to 3.75 percentage points (for the Ontario Municipal Employees Retirement System plan) above the real return bond
Treasury VUSTX American Century Target Mat 2015 Inv BTFTX Short Managers Intermediate Duration Govt MGIDX Government Fidelity Intermediate Government FSTGX Vanguard Short-term Federal VSGBX Scudder GNMA AARP AGNMX Eaton Vance Government Obligations A EVGOX Muni First Inv Insur Tax Exempt II EIITX Nationals Harris Tax Exempt Bond N HXBAX First Inv Ins Int Tax Exempt A FIITX Victory Natl Muni Bond A VNMAX Harris Insight Interm Tax Exempt Bond N HIXAX Intermediate ING Intermediate Bond A IIBAX Bonds PIMCO Real Return Bond
A PRTNX ([dagger]) ING Intermediate Bond B N/A N/A Regions Morgan Keegan Select Int Bd A MKIBX FPA New Income Inc.
"The weakness spread across the market, but inflation-sensitive longer-duration bonds were the most affected as the DEX Real Return Bond
Index declined 13.1 per cent while DEX Long Term Bonds were down 6.2 per cent," noted MacDonald.
Fund Name (Ticker) Total Return(*) Total Return PIMCO Real Return Bond
A (PRTNX) 7.32% 15.23% PIMCO Total Return Mtg D (PTMDX) 3.87 14.21 Advantus Mortgage Secs Inc A (ADMSX) 4.08 14.14 Deutsche Short-Term Inc A (FLINX) 3.52 12.30 Harris Ins Sh/Int Bond N (HIMBX) 3.54 12.29 3-Year Ann.
Strength came from the longer end of the curve, with FTSE/TMX Long Term bonds rising 5.1 per cent and FTSE/TMX Real Return Bonds
up 6.1 per cent, said MacDonald.
This edition adds new content, including a new chapter on exchange trade funds, a new section on forecasting interest rates, and expanded sections on preferred shares, convertible bonds, bond market transparency, and real return bonds
. It includes an updated analysis of online fixed-income trading and incorporates an update on Canada's ABCP (asset-backed commercial paper) fiasco and what has happened in the income trust sector.
TIPS are structured similarly to the real return bonds
currently issued in Canada.
With contribution rates at 16 percent of payroll (split evenly between the province and the teachers), the Fund could hedge its liabilities almost perfectly with 4.5 percent real return bonds
. Unfortunately, we cannot find enough of them, and they yield only about 4 percent.
There is a wide range of products known as derivatives including puts, calls, strips, straddles, TIPS, bulls, currency-linked and real return bonds
. This host of esoteric securities has provided investors with an array of investment vehicles, and to some, an equal amount of confusion.
Patterned on the Canadian government's Real Return Bonds
or RRBs [Circular], the new U.S.
Year-to-date, bond holdings declined 1.7 per cent while the DEX Long Term index lost 5.9 per cent and DEX Real Return Bonds
are down 11.4 per cent.
Weakness was across the market, but longer duration bonds were the most affected, as the DEX Long Term Index declined 4.6 per cent in the quarter and DEX Real Return Bonds
are down 11 per cent year-to-date, noted MacDonald.