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It’s time to start thinking about applying the most basic rule of investing in stocks to bonds: Buy low.

Bond prices have plunged this year, which means yields have risen sharply. We are now getting into a zone on yields where investors with a long-term perspective may find some interesting developments, particularly in corporate bonds.

The yield on the FTSE Canada All Corporate Bond Index was around 4.8 per cent in late June. An exchange-traded fund holding corporate bonds should offer an after-fee yield of 4.3 to 4.6 per cent these days.

You’ll fall short of the 5 per cent yield you can now get in GICs with these ETFs, but there are some offsetting benefits. Bond ETFs have the liquidity of a stock, while GICs are locked in unless they’re cashable and thus have a lower interest rate. Bond ETFs also offer the potential for capital gains when interest rates decline.

Individual corporate bonds in the investment-grade category – generally, BBB and higher – can get you yields of 4 to 5 per cent for terms as short as two years.

Example: A BBB-rated Home Trust Co. bond maturing June 13, 2024, had a yield of 5.1 per cent in late June.

If you’re willing to hold out for four to five years, there are options like a BBB-high rated H&R REIT bond maturing June 2, 2026, offering a yield of 5 per cent.

For the past 20 years or so, a 5-per-cent yield from a bond or GIC has been the impossible dream for conservative investors. So what about locking in a yield of 5 per cent or better for the next 20 years or longer?

It’s possible, if you consider the likes of the Bell Canada bond maturing Dec. 18, 2045, and offering a yield of 5.6 per cent as of late June. A Metro Inc. bond maturing Dec. 4, 2047, offered a yield of 5.5 per cent.

The price of long-term bonds like these would likely get slammed if interest rates continue to rise, as is widely expected. One option is to keep an eye on these bonds and wait for still higher yields ahead. Then again, 5 per cent has proven to be a rarely available yield from an investment grade bond over the past couple of decades. If inflation exhausts itself in the next year or so, it may again be so.

-- Rob Carrick, personal finance columnist

Also see: In a world economy turned upside down, Ian Brown goes searching for answers in the bond markets

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Stocks to ponder

Alimentation Couche-Tard Inc. (ATD-T) Shares in the Quebec-based operator of Circle K, Couche-Tard and Ingo-branded convenience stores in Canada, the United States and Europe have outperformed the S&P/TSX Composite Index this year. But most investors are probably not celebrating. After the share price essentially doubled over the four years from May, 2018, to May, 2022, following a succession of deals that increased the company’s store count by 40 per cent, the shares have fallen 18 per cent since mid-May. The stock is now trading at levels seen last July. David Berman looks at why this may be a buying opportunity.

TransAlta Corp. (TA-T) Last quarter, the share price of this utility rallied 14 per cent, making it the top performing stock in the S&P/TSX utilities index. Earnings expectations have remained relatively stable. Meanwhile, the stock has nine buy recommendation and two neutral recommendations with an anticipated one-year price return of nearly 12 per cent. Jennifer Dowty looks at the latest investment case.

The Rundown

What a $6-billion Scotiabank fund manager is buying and selling

There are two types of bear markets, notes money manager Vishal Patel – those that come with a recession and those that bypass it. While he’s not placing bets on which one we’re in currently, Mr. Patel believes the market downturn is a good time for longer-term investors to make money. Brenda Bouw checked in with the Scotiabank money manager to see what he’s been buying and selling of late.

Why are strategists still so positive, despite all the bad news

Wall Street forecasters are still a remarkably optimistic lot despite plunging share prices and recession forecasts that have become as common as long-weekend hotdogs. On average, top strategists predict the S&P 500 index will finish 2022 at 4,482. If these strategists are right, U.S. stocks are poised to jump 18 per cent above where they closed last week. This would be surprising, to say the least. For one thing, the S&P suffered its worst first half since 1970 during the past six months. For another, stock market gains of the magnitude the strategists are predicting just don’t happen that often. Ian McGugan explains.

Also see:

Investors brace for pivotal July after dismal first half

These three common inflation myths don’t describe what is happening right now

Banks block online sale of cash ETFs that compete with bank savings products

Some of Canada’s largest banks are blocking online investors from buying high-interest-savings exchange traded funds, which compete with the banks’ own lucrative deposit accounts. Clare O’Hara tells us more.

Are bank stocks reflecting a recession? Not yet, and that’s a concern

Canadian bank stocks are struggling as investors fret over the possibility of an oncoming recession, but some analysts believe that banks are not yet reflecting an ugly economic downturn. Should investors stay clear at this juncture? David Berman shares some thoughts.

Why Canadian energy stocks are a no-brainer

Over the past few weeks, the energy sector has taken a big hit, as concerns about a global recession have knocked crude oil prices off their steady upward trajectory dating back to the start of the year. Global oil benchmarks, however, are still comfortably higher than US$100 a barrel, where they are very likely to remain for the foreseeable future. That commodity backdrop equates to enormous profits for Canadian energy producers, which are suddenly on sale for those who still care to invest in fossil fuels. Tim Shufelt looks at why this may be an ideal time to load up on Canadian energy stocks.

Markets are falling, but my dividends keep going up

Some people celebrate Canada Day by wearing red and white or heading out to watch the fireworks. John Heinzl, however, likes to express his patriotism by adding up all the dividend increases from the Canadian companies in his model Yield Hog Dividend Growth Portfolio. As he explains here, his dividend growth stocks have not let him down.

How a SPAC deal can go horribly wrong

Have you ever written a blank cheque or made a purchase without knowing what you’ve just bought? The answer is probably “no,” unless you’ve participated in a SPAC or two. Over the past few years, SPACs, or Special Purpose Acquisition Companies, have been all the rage, and investors haven’t been able to get enough. That is, up until recently. And this look at Electric Last Mile Solutions by The Contra Guys’ Philip MacKellar is an example of things going very wrong in the SPAC space.

Exchange-traded funds

ETFs for investors willing to bet on REITs in a rising rate environment

ETFs for investors willing to ride out the volatility in the clean energy sector

Others (for subscribers)

The most oversold and overbought stocks on the TSX

Monday’s analyst upgrades and downgrades

Number Cruncher: Ben Graham-inspired value stock criteria uncover 10 dividend-paying U.S. large caps

Metals melt down as recession fears overwhelm supply woes

Globe Advisor

Is now the right time to invest in REITs despite major headwinds?

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Ask Globe Investor

Question: I am planning to retire in 2025. However, it could be earlier. I have some funds sitting in GICs in a non-registered account. I have no room in my TFSA. Can you recommend a tax efficient or tax deferred ETF or mutual fund? I am looking for an investment to produce monthly income. At the beginning, I will reinvest the monthly income, but I will expect to take it every month when I retire. – A. M.

Answer: Take a look at the BMO Covered Call Canadian Banks ETF (ZWB-T). Based on your goals, it appears to be well-suited for your needs. It invests in the top six banks, so the risk level is relatively low. The managers use covered call writing to enhance cash flow. Currently, the fund is paying $0.11 a month ($1.32 a year), which works out to a yield of just over 7 per cent based on the recent price. Most of the distributions are received as eligible dividends or return of capital, so the fund is highly tax efficient. The ETF was launched in 2011 and has a ten-year average annual compound rate of return of 10.4 per cent. The management expense ratio is 0.71 per cent.

--Gordon Pape

What’s up in the days ahead

Financial adviser John De Goey has a few pointed words for those investors calling this a “stock picker’s market.” And Gordon Pape will have some smaller-cap stock picks in the TSX energy sector.

Click here to see the Globe Investor earnings and economic news calendar.

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Compiled by Globe Investor Staff