Canadian Bond ETFs

This Page's Content Was Last Updated: January 13, 2023
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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
NameSymbolCategory
BMO Aggregate Bond Index ETFZAG13.863.51Canadian Fixed Income2.29
iShares Core Canadian Universe Bond Index ETFXBB28.242.86Canadian Fixed Income3.66
Vanguard Canadian Aggregate Bond Index ETFVAB23.062.81Canadian Fixed Income3.66
BMO Core Plus Bond ETFZCPB27.532.94Canadian Fixed Income1.81
iShares Core Canadian Short Term Bond Index ETFXSB25.852.21Canadian Short Term Fixed Income0.99
Horizons CDN Select Universe Bond ETFHBB46.080Canadian Fixed Income3.53
Russell Investments Fixed Income ETFRIFI18.162Canadian Fixed Income2.37
BMO Mid-Term US IG Corporate Bond Index ETF (CAD)ZIC17.13.92Global Corporate Fixed Income5.64
BMO Mid-Term US IG Corporate Bond Hedged to CAD Index ETFZMU12.624.31Global Corporate Fixed Income-2.55
NBI Unconstrained Fixed Income ETFNUBF235.3Global Fixed Income-0.47
BMO Long Federal Bond Index ETFZFL14.393.62Canadian Long Term Fixed Income3.89
iShares Core Canadian Corporate Bond Index ETFXCB19.293.5Canadian Corporate Fixed Income2.54
TD Canadian Long Term Federal Bond ETFTCLB129.11.32Canadian Long Term Fixed Income4.67
iShares Core Canadian Short Term Corporate Bond Index ETFXSH17.972.89Canadian Short Term Fixed Income1.21
BMO Short Corporate Bond Index ETFZCS13.093.22Canadian Short Term Fixed Income0.93
CIBC Active Investment Grade Corporate Bond ETFCACB18.893.09Canadian Corporate Fixed Income0.82
NBI High Yield Bond ETFNHYB20.817.32High 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 QualityAA
Effective Duration (years)7.33
RiskAverage
3 Year Alpha0.1
3 Year Beta1.02
3 Year R-Squared (%)74.6
3 Year Sharpe Ratio-0.5
Management Expense Ratio0.09%
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% 01Dec2051122,131,0002051-12-01103,981,745
1.3%CANADIAN GOVERNMENT BOND 1.5% 01Jun203196,903,0002031-06-0187,530,582
1.23%CANADIAN GOVERNMENT BOND .5% 01Sep202589,584,0002025-09-0182,716,385
1.17%CANADIAN GOVERNMENT BOND 1.5% 01Jun202683,376,0002026-06-0178,750,132
1.09%CANADIAN GOVERNMENT BOND 1.5% 01Sep202476,067,0002024-09-0173,495,773
1.08%CANADIAN GOVERNMENT BOND 2.25% 01Jun202574,941,0002025-06-0172,756,975
1.08%CANADIAN GOVERNMENT BOND 1.25% 01Jun203080,863,0002030-06-0172,583,607
1.05%CANADIAN GOVERNMENT BOND 2.5% 01Jun202472,196,0002024-06-0170,832,228
1.04%CANADIAN GOVERNMENT BOND 1.5% 01Dec203177,862,0002031-12-0169,949,799
0.97%PROVINCE OF ONTARIO CANADA 2.6% 02Jun202767,933,0002027-06-0265,672,179

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 QualityAA
Effective Duration (years)7.64
RiskAverage
3 Year Alpha0.12
3 Year Beta1.02
3 Year R-Squared (%)98.46
3 Year Sharpe Ratio-0.49
Management Expense Ratio0.1%
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

IssuerWeight (%)
CANADA (GOVERNMENT OF)25.58
ONTARIO (PROVINCE OF)14.02
CANADA HOUSING TRUST NO.19.13
QUEBEC (PROVINCE OF)7.73
ALBERTA (PROVINCE OF)3.04
BRITISH COLUMBIA (PROVINCE OF)2.78
TORONTO-DOMINION BANK/THE1.64
MANITOBA (PROVINCE OF)1.58
ROYAL BANK OF CANADA1.3
HYDRO-QUEBEC1.28

iShares Core Canadian Universe Bond Index ETF

XBB
XBB Adjusted for Dividends
Weight of different maturity intervals of XBB holdings in %
20+ Years20.47
15 - 20 Years4.96
10 - 15 Years4.93
7 - 10 Years18.34
5 - 7 Years10.00
3 - 5 Years17.79
2 - 3 Years11.80
1 - 2 Years11.66

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 QualityAA
Effective Duration (years)7.36
RiskAverage
3 Year Alpha0.1
3 Year Beta1
3 Year R-Squared (%)98.16
3 Year Sharpe Ratio-0.52
Management Expense Ratio0.09%
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 RatingWeight
AAA38.30%
AA41.00%
A12.90%
BBB7.70%

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 QualityA
Effective Duration (years)7
RiskBelow Average
3 Year Alpha-0.43
3 Year Beta0.98
3 Year R-Squared (%)97.75
3 Year Sharpe Ratio-0.63
Management Expense Ratio0.56%
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 QualityAA
Effective Duration (years)2.67
RiskAverage
3 Year Alpha-0.02
3 Year Beta1.08
3 Year R-Squared (%)98.91
3 Year Sharpe Ratio-0.4
Management Expense Ratio0.10%
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

IssuerWeight (%)
CANADA (GOVERNMENT OF)28.99
CANADA HOUSING TRUST NO.113.63
ONTARIO (PROVINCE OF)8.49
QUEBEC (PROVINCE OF)3.75
TORONTO-DOMINION BANK/THE3.38
ROYAL BANK OF CANADA2.88
BANK OF NOVA SCOTIA2.68
BANK OF MONTREAL2.61
CANADIAN IMPERIAL BANK OF COMMERCE2.6
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 QualityAA
Effective Duration (years)7.51
RiskBelow Average
3 Year Alpha0.01
3 Year Beta1
3 Year R-Squared (%)98.02
3 Year Sharpe Ratio-0.52
Management Expense Ratio0.1%
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 QualityBBB
Effective Duration (years)7.38
Management Expense Ratio0.59%
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 QualityBBB
Effective Duration (years)6.26
RiskAbove Average
3 Year Alpha1.18
3 Year Beta0.95
3 Year R-Squared (%)85.06
3 Year Sharpe Ratio-0.4
Management Expense Ratio0.28%
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 QualityBBB
Effective Duration (years)6.26
RiskAbove Average
3 Year Alpha0.02
3 Year Beta0.87
3 Year R-Squared (%)53.46
3 Year Sharpe Ratio-0.56
Management Expense Ratio0.28%
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 QualityBB
RiskAbove 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 Ratio0.86%
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 QualityAAA
Effective Duration (years)16.49
RiskAbove Average
3 Year Alpha-1.59
3 Year Beta0.94
3 Year R-Squared (%)84.69
3 Year Sharpe Ratio-0.73
Management Expense Ratio0.22%
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 QualityA
Effective Duration (years)5.97
RiskAverage
3 Year Alpha-0.17
3 Year Beta0.95
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 QualityA
Effective Duration (years)2.72
RiskAbove Average
3 Year Alpha0.39
3 Year Beta1.22
3 Year R-Squared (%)67.91
3 Year Sharpe Ratio-0.2
Data from morningstar.ca as of 6 December 2022.
The calculators and content on this page are provided for general information purposes only. WOWA does not guarantee the accuracy of information shown and is not responsible for any consequences of the use of the calculator.