Looking to invest in the bond markets without having to pick your own securities?
iShares XSB ETF might be the right choice for you to get easy access to bonds.
Let’s go over this iShares XSB ETF review to see if it’s the right choice for you.
Invest In Canadian Short-Term Bonds
Invest in iShares XSB ETF to gain exposure to Canadian investment-grade bonds that pay monthly cash distributions with a low degree of interest rate risk.
- Monthly income
- Low-cost exposure to a group of investment-grade bonds
- Sensitive to interest rate changes
iShares Core Canadian Short Term Bond Index ETF (XSB) is a low-cost Exchange-Traded Fund (ETF) that offers you exposure to the performance of a group of fixed-income securities with short maturity dates.
iShares XSB seeks to provide you with income by emulating the performance of the FTSE Canada Short Term Overall Bond Index before fees and expenses.
The fund’s inception was in November 2000. iShares XSB ETF allocates its assets under management to Canada-listed fixed-income assets.
XSB.TO is currently trading at close to $25.88.
XSB Key Facts
As of June 30, 2022:
- Ticker Symbol: XSB.TO
- Exchange: Toronto Stock Exchange
- Assets Under Management: $3.15 Billion
- MER: 0.10%
- 12-Month Trailing Yield: 2.13%
- Currency Traded: CAD
- Eligible Accounts: Most registered (TFSA, RRSP, etc) and non-registered available
The management fee for iShares XSB ETF is 0.09%, and its MER amounts to 0.10%.
iShares XSB’s dividend yield as of July 18, 2022:
- 12-month trailing yield: 2.13%
- Distribution yield: 2.18%
- Dividend schedule: Monthly
The fund is designed as an income-generating investment tool that offers monthly returns on your investment.
The fund distributes payments each month based on the bond yields of its constituent securities. The returns come in at a lower yield compared to what you might expect from high-yielding equity security ETFs.
iShares XSB’s growth of a hypothetical $10,000 since inception is seen below:
| 1y | 3y | 5y | 10y | Incept. | |
|---|---|---|---|---|---|
| Average Annual Return (%) | -4.89 | -0.05 | 0.81 | 1.25 | 3.41 |
| Benchmark (%) | -4.79 | 0.05 | 0.90 | 1.42 | 3.43 |
The underlying index comprises Canadian investment-grade bonds with maturities that range from one to five years.
iShares XSB ETF’s focus on fixed-income assets makes it a low-risk investment compared to funds that allocate assets to equity securities.
iShares XSB ETF primarily invests in various government-issued investment-grade bonds, totalling 534 individual products as of July 19, 2022.
As of July 18, 2022, its top issuers comprise the Government of Canada, accounting for 27.51% of its asset allocation.
Canada Housing Trust No. 1 is the second-largest issuer, accounting for 15.75% of its asset allocation. The Province of Ontario is the third-largest issuer, accounting for 9.18% of its asset allocation.
| Issuer | Weight (%) |
|---|---|
| CANADA (GOVERNMENT OF) | 27.51 |
| CANADA HOUSING TRUST NO.1 | 15.75 |
| ONTARIO (PROVINCE OF) | 9.18 |
| QUEBEC (PROVINCE OF) | 3.84 |
| TORONTO-DOMINION BANK/THE | 3.17 |
| ROYAL BANK OF CANADA | 2.78 |
| CANADIAN IMPERIAL BANK OF COMMERCE | 2.37 |
| BANK OF NOVA SCOTIA | 2.32 |
| BANK OF MONTREAL | 2.21 |
| ALBERTA (PROVINCE OF) | 2.15 |
As of July 19, 2022:
| Name | Sector | Weight (%) |
|---|---|---|
| CANADA (GOVERNMENT OF) | Federal | 2.54 |
| CANADA HOUSING TRUST NO 1 144A | Federal | 2.07 |
| CANADA (GOVERNMENT OF) | Federal | 2.06 |
| CANADA (GOVERNMENT OF) | Federal | 1.82 |
| CANADA (GOVERNMENT OF) | Federal | 1.74 |
| CANADA (GOVERNMENT OF) | Federal | 1.73 |
| ONTARIO (PROVINCE OF) | Provincial | 1.72 |
| CANADA (GOVERNMENT OF) | Federal | 1.72 |
| CANADA (GOVERNMENT OF) | Federal | 1.71 |
| CANADA HOUSING TRUST NO.1 144A | Federal | 1.58 |
This section of my iShares XSB ETF review will cover the sector weightings of the fund’s assets.
iShares XSB invests in government-issued bonds and those issued by some of the top financial institutions in the country.
As of July 18, 2022, iShares XSB ETF allocates 46.62% of its assets to federal government sector investment-grade bonds. It allocates 19.88% of its assets to financial sector bonds. Provincial government bonds account for its third-largest asset allocation at 19.71%.
| Type | Fund (%) |
|---|---|
| Federal | 46.62 |
| Financial | 19.88 |
| Provincial | 19.71 |
| Energy | 3.70 |
| Real Estate | 2.69 |
| Communication | 2.15 |
| Industrial | 1.90 |
| Municipal | 1.40 |
| Infrastructure | 1.08 |
| Securitized | 0.89 |
| Other | 0.00 |
| Cash and/or Derivatives | -0.01 |
As of July 18, 2022:
| Type | Fund |
|---|---|
| AAA | 48.46 |
| AA | 20.93 |
| A | 18.79 |
| BBB | 11.74 |
| Cash and/or Derivatives | -0.01 |
| Other | 0.09 |
iShares XSB ETF invests in investment-grade bonds with maturity periods ranging from one to five years.
Its weighted average maturity is 3.19 years as of July 18, 2022. This section of my iShares XSB ETF review will cover the various bond maturities of the fund’s holdings.
As of July 18, 2022, 42.10% of its holdings comprise bonds with a maturity of three to five years. 29.30% of the fund’s holdings comprise bonds with one to two years till maturity.
26.56% of its holdings are bonds with two to three years left till maturity. It also allocates 1.45% of its assets to relatively long-term bonds with a maturity of seven to ten years.
| Type | Fund |
|---|---|
| 0 – 1 Years | 0.14 |
| 1 – 2 Years | 29.30 |
| 2 – 3 Years | 26.56 |
| 3 – 5 Years | 42.10 |
| 7 – 10 Years | 1.45 |
| 10 – 15 Years | 0.04 |
| 20+ Years | 0.42 |
| Cash and Derivatives | -0.01 |
iShares XSB has a low-risk indicator.
This section of my iShares XSB ETF review will discuss a few funds that you could compare this product to as potential alternatives to investing in this bond ETF.
iShares Core Canadian Universe Bond Index ETF (XBB) is another Canadian bond ETF issued by BlackRock Canada.
The low-cost fund offers broad exposure to the Canadian investment-grade bond market and pays monthly cash distributions, making it a long-term core holding.
The fund tracks the performance of the FTSE Canada Universe Bond Index, net of expenses. iShares XBB ETF invests in 1,454 products as of July 19, 2022.
As of July 18, 2022, XBB’s weighted average maturity stands at 10.32 years, and it boasts a yield of 2.86%. It could be a viable alternative to iShares XSB as a monthly passive income investment.
iShares US Aggregate Bond Index ETF (XAGG) is another fund issued by BlackRock Canada that focuses entirely on investing in fixed-income securities.
The fund differs from iShares XSB in that it offers broad exposure to the investment-grade bond market in the US. It comes in as a convenient solution to diversify your portfolio in the US fixed-income market.
It tracks the performance of the Bloomberg US Aggregate Bond Index, a fund that is broadly representative of the US dollar-denominated investment-grade bond market. iShares XAGG ETF has a dividend yield of 1.40% (as of July 18, 2022).
Vanguard Canadian Short-Term Bond Index ETF (VSB) is another Canadian bond ETF that offers you exposure to the performance of a group of short-term Canadian fixed-income assets.
The fund tracks the Bloomberg Global Aggregate Canadian Government/Credit 1-5 year Float Adjusted Bond Index. The fund invests in investment-grade fixed-income securities issued in Canada.
It is also a low-cost fund that offers monthly distributions. As of June 30, 2022, VSB boasts a 12-month trailing yield of 2.12%, but its distribution yield in recent months stands at 2.47%. It might not be a viable alternative to iShares XSB as a monthly passive income fund.
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Conclusion
The unpredictability of the performance of equity securities can lead to uncertainty in your investment returns.
It is a good idea to diversify your investment portfolio to introduce a degree of stability and reliability to your returns.
If you are looking for a way to generate consistent and predictable monthly returns through passive income, investing in a bond ETF like iShares XSB ETF would be an easy option for you to consider.
iShares XSB ETF is a single-ticket investment that lets you gain exposure to the performance of a basket of Canadian short-term bonds.
It might not offer the capital gains or dividend yield of equity ETFs, but it eliminates the risks that come with investing in those products.
If you’re looking for other monthly dividend-paying ETFs with relatively higher dividend yields, consider checking out my breakdown of the best monthly dividend ETFs in Canada.
Check out my breakdown of the best bond ETFs in Canada if you’re looking for a more comprehensive list of fixed-income ETFs you can consider.
