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3 top picks from Odlum Brown’s Hank Cunningham

Hank Cunningham.


Hank Cunningham is a fixed-income strategist at Odlum Brown Ltd.

Top picks:

Bell Canada
3.35 per cent, June 18 2019

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Reliance LP
4.574 per cent, March 15, 2017

5 per cent, Dec.1 2018

Past picks: Aug. 02, 2012

Province of Ontario, 3.15 per cent
Then: $103.12
Now: $104.28
Total return: +4.71 per cent

iShares U.S. High Yield Bond Index Fund (CAD-hedged)
Then: $20.92
Now: $22.20
Total return: +10.81 per cent

TransAlta 6.40 per cent 11/18/2019
Then: $109.45
Now: $114.20
Total return: +10.59 per cent

Total return average: +8.70 per cent

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Market outlook:

The U.S. economy has emerged from its recent soft patch after the effects of sequestration. The recovery should accelerate to a 4-per-cent growth rate for the balance of 2013.

As this will be accompanied by tame inflation and the ongoing QE3 bond purchase program of the Federal Reserve, it is difficult to see any significant upward move in bond yields. Should the recovery take firmer hold, the Fed will have to give consideration to an early exit from its monetary stimulus. Should that happen, there could be an upward move in bond yields.

We expect the yield range of the bellwether U.S. ten-year bond to be from 1.60 per cent to 2.25 per cent for the balance of 2013. With its yield close to the low end of this range, government bonds will not exhibit positive performance from this point on.

Investment grade corporate bonds will continue to generate positive returns.

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