Canadian Bond ETFs

This Page's Content Was Last Updated: January 13, 2023

WOWA Simply Know Your Options

What You Should Know

Rising interest rates over the past year have triggered losses for all asset classes except cash.
After many years of safe bonds earning almost nothing, finally safe bonds can provide some income.
ZAG, XBB and VAB provide broad allocation to low-risk Canadian bonds.
You can use XSB to reduce the negative effect of rising interest rates on your bond allocation.
You can use ZCPB to have your bond allocation professionally managed.

Best Bond ETFs in Canada
Name	Symbol			Category
BMO Aggregate Bond Index ETF	ZAG	13.86	3.51	Canadian Fixed Income	2.29
iShares Core Canadian Universe Bond Index ETF	XBB	28.24	2.86	Canadian Fixed Income	3.66
Vanguard Canadian Aggregate Bond Index ETF	VAB	23.06	2.81	Canadian Fixed Income	3.66
BMO Core Plus Bond ETF	ZCPB	27.53	2.94	Canadian Fixed Income	1.81
iShares Core Canadian Short Term Bond Index ETF	XSB	25.85	2.21	Canadian Short Term Fixed Income	0.99
Horizons CDN Select Universe Bond ETF	HBB	46.08	0	Canadian Fixed Income	3.53
Russell Investments Fixed Income ETF	RIFI	18.16	2	Canadian Fixed Income	2.37
BMO Mid-Term US IG Corporate Bond Index ETF (CAD)	ZIC	17.1	3.92	Global Corporate Fixed Income	5.64
BMO Mid-Term US IG Corporate Bond Hedged to CAD Index ETF	ZMU	12.62	4.31	Global Corporate Fixed Income	-2.55
NBI Unconstrained Fixed Income ETF	NUBF	23	5.3	Global Fixed Income	-0.47
BMO Long Federal Bond Index ETF	ZFL	14.39	3.62	Canadian Long Term Fixed Income	3.89
iShares Core Canadian Corporate Bond Index ETF	XCB	19.29	3.5	Canadian Corporate Fixed Income	2.54
TD Canadian Long Term Federal Bond ETF	TCLB	129.1	1.32	Canadian Long Term Fixed Income	4.67
iShares Core Canadian Short Term Corporate Bond Index ETF	XSH	17.97	2.89	Canadian Short Term Fixed Income	1.21
BMO Short Corporate Bond Index ETF	ZCS	13.09	3.22	Canadian Short Term Fixed Income	0.93
CIBC Active Investment Grade Corporate Bond ETF	CACB	18.89	3.09	Canadian Corporate Fixed Income	0.82
NBI High Yield Bond ETF	NHYB	20.81	7.32	High Yield Fixed Income	-2.9
Data from morningstar.ca as of 6 December 2022.

The table above contains a list of the top 17 Canadian bond funds. A section on this page provides further details about each of the best 10 Canadian bond ETFs.

This is an exciting time to consider investing in bonds; because for many years after the 2008 financial crisis, we faced financial repression, where western central banks, including the Bank of Canada, suppressed interest rates. This suppression of interest rates resulted in very low mortgage rates and low returns for savings accounts, GICs and bonds. But finally, the era of financial repression is at an end, and you can earn a respectable yield from a safe portfolio of investment-grade bonds today.

Asset allocation is the most important question facing investors. The main asset categories include corporate stocks, bonds (fixed-income securities), real estate and cash equivalents. Investing in stocks is considered a high-risk, high-reward allocation. Investing in bonds which generally entails lower risk and lower reward can be done effectively through bond ETFs introduced on this page. Investing in real estate can be done conveniently through Real Estate Investment Trusts (REITS) or even better through REIT ETFs. Finally, money market funds allow you to earn some income on the cash allocation in your portfolio.

The art and science of investing is all about striking the right balance between the risk you are taking and the reward you would receive. Asset allocation is the tool by which an investor can strike a balance between risk and return.

This page presents some of your best options for allocating your portfolio's fixed income (bond) portion.

R-Squared

Coefficient of determination is often known as R-squared in finance and investment. In statistics, the coefficient of determination measures (quantifies) the portion of the variation (changes) in a dependent variable (like the return of an ETF) which can be explained as a result of variation (changes) in the independent variable (like a relevant market index).

In finance, R-squared is often used to measure how much of the return produced by a fund is explained by the return of the relevant index.

R-squared is a number between 0 and 1. An R-squared equal to 0 means none of the changes in the investment is explained by changes in the index, while an R-squared equal to one means changes in the index explain all variation in the investment return. R- squared is often expressed as a percentage.

BMO Aggregate Bond Index ETF - ZAG

BMO Aggregate Bond Index ETF - ZAG
Annualized Return (%)	1-year: -8.56 3-year: -1.48 5-year: 0.66 10-year: 1.71
Manager Tenure (Yrs)	12.92
Fund Size (Mil)	$6718.32
Average Credit Quality	AA
Effective Duration (years)	7.33
Risk	Average
3 Year Alpha	0.1
3 Year Beta	1.02
3 Year R-Squared (%)	74.6
3 Year Sharpe Ratio	-0.5
Management Expense Ratio	0.09%
Data from morningstar.ca as of 6 December 2022.

BMO Aggregate Bond Index ETF - ZAG replicates the performance of the FTSE Canada Universe Bond Index™. FTSE Canada Universe Bond Index™ is a representative index of almost all Canadian investment-grade bonds. These include bonds issued by the federal government, provincial governments and corporations denominated in Canadian dollars. The bonds in this index have term lengths longer than a year and pay a fixed rate of interest semi-annually. Being investment grade means that the bond issue would have a credit rating of BBB or higher. ZAG rebalances its portfolio every day. Different bond issuances are represented in ZAG with weights based on their market capitalization.

Top 10 Holdings

	Name	($)		($)
1.54%	CANADIAN GOVERNMENT BOND 2% 01Dec2051	122,131,000	2051-12-01	103,981,745
1.3%	CANADIAN GOVERNMENT BOND 1.5% 01Jun2031	96,903,000	2031-06-01	87,530,582
1.23%	CANADIAN GOVERNMENT BOND .5% 01Sep2025	89,584,000	2025-09-01	82,716,385
1.17%	CANADIAN GOVERNMENT BOND 1.5% 01Jun2026	83,376,000	2026-06-01	78,750,132
1.09%	CANADIAN GOVERNMENT BOND 1.5% 01Sep2024	76,067,000	2024-09-01	73,495,773
1.08%	CANADIAN GOVERNMENT BOND 2.25% 01Jun2025	74,941,000	2025-06-01	72,756,975
1.08%	CANADIAN GOVERNMENT BOND 1.25% 01Jun2030	80,863,000	2030-06-01	72,583,607
1.05%	CANADIAN GOVERNMENT BOND 2.5% 01Jun2024	72,196,000	2024-06-01	70,832,228
1.04%	CANADIAN GOVERNMENT BOND 1.5% 01Dec2031	77,862,000	2031-12-01	69,949,799
0.97%	PROVINCE OF ONTARIO CANADA 2.6% 02Jun2027	67,933,000	2027-06-02	65,672,179

BMO Aggregate Bond Index ETF

ZAG

ZAG Adjusted for Dividends

iShares Core Canadian Universe Bond Index ETF - XBB

iShares Core Canadian Universe Bond Index ETF - XBB
Annualized Return (%)	1-year: -7.67 3-year: -1.36 5-year: 0.68 10-year: 1.75
Manager Tenure (Yrs)	22.08
Fund Size (Mil)	$4,761.88
Average Credit Quality	AA
Effective Duration (years)	7.64
Risk	Average
3 Year Alpha	0.12
3 Year Beta	1.02
3 Year R-Squared (%)	98.46
3 Year Sharpe Ratio	-0.49
Management Expense Ratio	0.1%
Data from morningstar.ca as of 6 December 2022.

iShares Core Canadian Universe Bond Index ETF - XBB also replicates the performance of FTSE Canada Universe Bond Index™. This is a diversified bond index holding 1475 bond issues. This BlackRock product is distributing its income to investors on a monthly basis. The last distribution in the middle of November 2022 was 7 cents.

Top Issuer

Issuer	Weight (%)
CANADA (GOVERNMENT OF)	25.58
ONTARIO (PROVINCE OF)	14.02
CANADA HOUSING TRUST NO.1	9.13
QUEBEC (PROVINCE OF)	7.73
ALBERTA (PROVINCE OF)	3.04
BRITISH COLUMBIA (PROVINCE OF)	2.78
TORONTO-DOMINION BANK/THE	1.64
MANITOBA (PROVINCE OF)	1.58
ROYAL BANK OF CANADA	1.3
HYDRO-QUEBEC	1.28

iShares Core Canadian Universe Bond Index ETF

XBB

XBB Adjusted for Dividends

Weight of different maturity intervals of XBB holdings in %
20+ Years	20.47
15 - 20 Years	4.96
10 - 15 Years	4.93
7 - 10 Years	18.34
5 - 7 Years	10.00
3 - 5 Years	17.79
2 - 3 Years	11.80
1 - 2 Years	11.66

Vanguard Canadian Aggregate Bond Index ETF - VAB

Vanguard Canadian Aggregate Bond Index ETF - VAB
Annualized Return (%)	1-year: -7.61 3-year: -1.34 5-year: 0.67 10-year: 1.75
Manager Tenure (Yrs)	11.08
Fund Size (Mil)	$3,872.17
Average Credit Quality	AA
Effective Duration (years)	7.36
Risk	Average
3 Year Alpha	0.1
3 Year Beta	1
3 Year R-Squared (%)	98.16
3 Year Sharpe Ratio	-0.52
Management Expense Ratio	0.09%
Data from morningstar.ca as of 6 December 2022.

Vanguard Canadian Aggregate Bond Index ETF - VAB tracks the performance of the Bloomberg Global Aggregate Canadian Float Adjusted Bond Index. The Bloomberg Global Aggregate Canadian Float Adjusted Bond Index is representative of the investment grade bonds issued in Canadian dollar with maturities longer than one year. VAB includes 1128 bond issues with a weighted average yield to maturity of 4.3% and average duration of 7.4 years as of 31 October 2022. 95.5% of the holdings of VAB are Canadian and 2.4% are American.

Credit Rating	Weight
AAA	38.30%
AA	41.00%
A	12.90%
BBB	7.70%

Vanguard Canadian Aggregate Bond Index ETF - VAB

VAB

VAB Adjusted for Dividends

BMO Core Plus Bond ETF - ZCPB

BMO Core Plus Bond ETF - ZCPB
Annualized Return (%)	1-year: -9.02 3-year: -1.95
Manager Tenure (Yrs)	8.08
Fund Size (Mil)	$3,682.06
Average Credit Quality	A
Effective Duration (years)	7
Risk	Below Average
3 Year Alpha	-0.43
3 Year Beta	0.98
3 Year R-Squared (%)	97.75
3 Year Sharpe Ratio	-0.63
Management Expense Ratio	0.56%
Data from morningstar.ca as of 6 December 2022.

While the first three Canadian bond ETFs introduced on this page where very large, low cost, passively managed index trackers, BMO Core Plus Bond ETF - ZCPB is an actively managed but still large fund which try to beat the performance of Canadian bond indices by changing the average duration of bonds it is holding and also by changing the weight of bonds issued by different sectors in its portfolio. This fund might also invest in foreign bonds and become exposed to foreign currencies. ZCPB distributes its income on a quarterly basis.

BMO Core Plus Bond ETF

ZCPB

ZCPB Adjusted for Dividends

iShares Core Canadian Short Term Bond Index ETF - XSB

iShares Core Canadian Short Term Bond Index ETF - XSB
Annualized Return (%)	1-year: -3.13 3-year: 0.14 5-year: 0.96 10-year: 1.23
Manager Tenure (Yrs)	22.08
Fund Size (Mil)	$2,889.60
Average Credit Quality	AA
Effective Duration (years)	2.67
Risk	Average
3 Year Alpha	-0.02
3 Year Beta	1.08
3 Year R-Squared (%)	98.91
3 Year Sharpe Ratio	-0.4
Management Expense Ratio	0.10%
Data from morningstar.ca as of 6 December 2022.

iShares Core Canadian Short Term Bond Index ETF - XSB replicates the performance of the FTSE Canada Short Term Overall Bond Index™. FTSE Canada Short Term Overall Bond Index™ includes investment grade Canadian bonds with maturities shorter than 5 years.

iShares Core Canadian Short Term Bond Index ETF

XSB

XSB Adjusted for Dividends

Top Issuer

Issuer	Weight (%)
CANADA (GOVERNMENT OF)	28.99
CANADA HOUSING TRUST NO.1	13.63
ONTARIO (PROVINCE OF)	8.49
QUEBEC (PROVINCE OF)	3.75
TORONTO-DOMINION BANK/THE	3.38
ROYAL BANK OF CANADA	2.88
BANK OF NOVA SCOTIA	2.68
BANK OF MONTREAL	2.61
CANADIAN IMPERIAL BANK OF COMMERCE	2.6
ALBERTA (PROVINCE OF)	1.94

as of Dec 8, 2022

Horizons CDN Select Universe Bond ETF - HBB

Horizons CDN Select Universe Bond ETF - HBB
Annualized Return (%)	1-year: -7.73 3-year: -1.41 5-year: 0.5
Manager Tenure (Yrs)	8.58
Fund Size (Mil)	$2,860.60
Average Credit Quality	AA
Effective Duration (years)	7.51
Risk	Below Average
3 Year Alpha	0.01
3 Year Beta	1
3 Year R-Squared (%)	98.02
3 Year Sharpe Ratio	-0.52
Management Expense Ratio	0.1%
Data from morningstar.ca as of 6 December 2022.

HBB uses a total return swap contract to replicate the performance of the Solactive Canadian Select Universe Bond Index (Total Return) which is an index composed of Canadian bonds with a credit rating of BBB or higher.

Russell Investments Fixed Income ETF - RIFI

Russell Investments Fixed Income ETF - RIFI
Annualized Return (%)	1-year: -8.6
Manager Tenure (Yrs)	29.92
Fund Size (Mil)	$2,721.48
Average Credit Quality	BBB
Effective Duration (years)	7.38
Management Expense Ratio	0.59%
Data from morningstar.ca as of 6 December 2022.

BMO Mid-Term US IG Corporate Bond Index ETF (CAD) - ZIC

BMO Mid-Term US IG Corporate Bond Index ETF (CAD) - ZIC
Annualized Return (%)	1-year: -8.03 3-year: -1.15 5-year: 2.26
Manager Tenure (Yrs)	9.75
Fund Size (Mil)	$2581.15
Average Credit Quality	BBB
Effective Duration (years)	6.26
Risk	Above Average
3 Year Alpha	1.18
3 Year Beta	0.95
3 Year R-Squared (%)	85.06
3 Year Sharpe Ratio	-0.4
Management Expense Ratio	0.28%
Data from morningstar.ca as of 6 December 2022.

The BMO Mid-Term U.S. IG Corporate Bond Index ETF is an index tracking ETF which tries to replicate the performance of the Bloomberg U.S. Investment Grade 5-10 Year Corporate Bond Index. This index includes US$ denominated taxable investment grade corporate bonds. Each issue has a minimum of $750 million of outstanding bonds and has between 5 to 10 years left until maturity.

BMO Mid-Term US IG Corporate Bond Hedged to CAD Index ETF - ZMU

BMO Mid-Term US IG Corporate Bond Hedged to CAD Index ETF - ZMU
Annualized Return (%)	1-year: 13.71 3-year: 2.65 5-year: 0.25
Manager Tenure (Yrs)	9.75
Fund Size (Mil)	$2484.79
Average Credit Quality	BBB
Effective Duration (years)	6.26
Risk	Above Average
3 Year Alpha	0.02
3 Year Beta	0.87
3 Year R-Squared (%)	53.46
3 Year Sharpe Ratio	-0.56
Management Expense Ratio	0.28%
Data from morningstar.ca as of 6 December 2022.

When you buy units of ZIC, you exchange your Canadian $ for US$ and use US$ to invest in bonds. So you will benefit from any potential appreciation in US$ and lose from any potential appreciation of CAD. In comparison, when you buy units of ZMU, you are investing in the same bonds but this time with borrowed US$. So with ZMU, changes in the exchange rate won’t affect your investment.

NBI Unconstrained Fixed Income ETF - NUBF

NBI Unconstrained Fixed Income ETF - NUBF
Annualized Return (%)	1-year: -5.64 3-year: 0.03
Manager Tenure (Yrs)	3.25
Fund Size (Mil)	$1,747.08
Average Credit Quality	BB
Risk	Above Average
3 Year Alpha	-0.56
3 Year Beta	-0.02
3 Year R-Squared (%)	-0.04
3 Year Sharpe Ratio	-0.28
Management Expense Ratio	0.86%
Data from morningstar.ca as of 6 December 2022.

BMO Long Federal Bond Index ETF - ZFL

BMO Long Federal Bond Index ETF - ZFL
Annualized Return (%)	1-year: -16.96 3-year: -5.37 5-year: -1.03 10-year: 0.73
Manager Tenure (Yrs)	12.58
Fund Size (Mil)	$2118.16
Average Credit Quality	AAA
Effective Duration (years)	16.49
Risk	Above Average
3 Year Alpha	-1.59
3 Year Beta	0.94
3 Year R-Squared (%)	84.69
3 Year Sharpe Ratio	-0.73
Management Expense Ratio	0.22%
Data from morningstar.ca as of 6 December 2022.

iShares Core Canadian Corporate Bond Index ETF - XCB

iShares Core Canadian Corporate Bond Index ETF - XCB
Annualized Return (%)	1-year: -7.55 3-year: -0.83 5-year: 1.05 10-year: 2.12
Manager Tenure (Yrs)	16.08
Fund Size (Mil)	$1626.69
Average Credit Quality	A
Effective Duration (years)	5.97
Risk	Average
3 Year Alpha	-0.17
3 Year Beta	0.95
3 Year R-Squared (%)	98.2
3 Year Sharpe Ratio	-0.27
Data from morningstar.ca as of 6 December 2022.

BMO Short Corporate Bond Index ETF - ZCS

BMO Short Corporate Bond Index ETF - ZCS
Annualized Return (%)	1-year: -3.92 3-year: 0.36 5-year: 1.39 10-year: 1.78
Manager Tenure (Yrs)	5.83
Fund Size (Mil)	$1252.84
Average Credit Quality	A
Effective Duration (years)	2.72
Risk	Above Average
3 Year Alpha	0.39
3 Year Beta	1.22
3 Year R-Squared (%)	67.91
3 Year Sharpe Ratio	-0.2
Data from morningstar.ca as of 6 December 2022.

Disclaimer:

Any analysis or commentary reflects the opinions of WOWA.ca analysts and should not be considered financial advice. Please consult a licensed professional before making any decisions.
The calculators and content on this page are for general information only. WOWA does not guarantee the accuracy and is not responsible for any consequences of using the calculator.
Financial institutions and brokerages may compensate us for connecting customers to them through payments for advertisements, clicks, and leads.
Interest rates are sourced from financial institutions' websites or provided to us directly. Real estate data is sourced from the Canadian Real Estate Association (CREA) and regional boards' websites and documents.