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3 top picks from Odlum Brown’s Hank Cunningham

Hank Cunningham, a 40-year veteran of the bond market, says investors are making the classic mistake of buying into an investment category only after it has surged in price.

JENNIFER ROBERTS FOR THE GLOBE AND MAIL/jennifer roberts The Globe and Mail

Hank Cunningham is a fixed income strategist with Odlum Brown.

Market outlook
The outlook is dominated by the events in Europe as there has been a huge safe haven bid in North American bond markets, driving yields to historic lows. In addition, the U.S. economy is in a soft patch and inflation has been ebbing. Thus, money market and bond yields will remain low. We expect that the U.S. economy will emerge from this soft patch in the second half of the year.

Of late, the euro authorities are displaying increased concern and determination to come to grips with the debt crisis. Should they implement strong measures and gain credibility, there would be some reversal in the flight-to-quality thereby producing mild upward pressure on bond yields in North America.

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Past Picks: November 28, 2011

Brookfield Asset Management 5.29 per cent 04/25/2017
TR: +5.67 per cent

Just Energy Convertible 6 per cent 06/30/2017
TR:+0.05 per cent

BMO Emerging Market Bond ETF
Then: $15.81
Now: $17.22
TR: +12.77 per cent

Total Return Average: +6.13 per cent

Top picks:

Province of Ontario 3.15 per cent 06/02/2022
I bought the Ontarios as insurance for yields falling further because of the Euro crisis. They have rallied almost a full point since buying them.

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iShares U.S. High Yield Bond Index Fund (CAD-Hedged)
XHY has been a long time favourite. It invests in the U.S. High Yield market and is hedged to CAD

TransAlta 6.40 per cent 11/18/2019
These debentures have fallen sharply over a possible downgrade. At 340 basis points over Canadas, they offer attractive yield.

Watch the BNN video here.

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