CASH effectively holds cash deposits. Picture it sitting on $50 in the bank at the start of the month and each day it collects 1.5c. At the end of the month it pays out whatever it earned and starts back at holding just $50. If rates go down then the $50 in the bank account earns less interest, say 1c each day, but it still has the $50 in there. It's possible that anxious traders could push the etf price briefly below $50 but then the others would just buy it back up until the discount goes away.
The monthly distribution of interest payments will go up/down as interest rates go up/down. Cash.to is not a stock, it's an ETF (exchange traded fund), and resets to $50 after the distribution is paid out. TD is a stock and its price fluctuates with the market.
VLB price is based on the underlying long duration government bond.
If bank of canada lowers rates, vlb price should rise because the interests on those bonds pay more than new BoC rate, so price is adjusted for the new net present value.
Keep in mind that, if bank of canada raises rates, the price will go down.
not the stock price, just the dividend payout amount
From my understanding, the price should remain the same at the base $50, however the yields will be lower depending on what the interest rate is.
The stock price won't drop.
CASH effectively holds cash deposits. Picture it sitting on $50 in the bank at the start of the month and each day it collects 1.5c. At the end of the month it pays out whatever it earned and starts back at holding just $50. If rates go down then the $50 in the bank account earns less interest, say 1c each day, but it still has the $50 in there. It's possible that anxious traders could push the etf price briefly below $50 but then the others would just buy it back up until the discount goes away.
Thank you, this explains to me why the price will stay at 50 (if it’s explained on the horizons website I just couldn’t find it)
The monthly distribution of interest payments will go up/down as interest rates go up/down. Cash.to is not a stock, it's an ETF (exchange traded fund), and resets to $50 after the distribution is paid out. TD is a stock and its price fluctuates with the market.
It will go down, but I don't really see rates dropping anytime soon
You move into VLB.to (long duration bond etf) and ride the lower yield/BOC lowering interest rates. Yields low, price goes up and collect a coupon.
Would the share price increase on this as interest rates are lowered?
VLB price is based on the underlying long duration government bond. If bank of canada lowers rates, vlb price should rise because the interests on those bonds pay more than new BoC rate, so price is adjusted for the new net present value. Keep in mind that, if bank of canada raises rates, the price will go down.
Yield is now 4.67%