XSB ETF Review 2022: iShares Core Canadian Short Term Bond Index ETF

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by Enoch Omololu, MSc (Econ)

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Exchange-Traded Funds (ETFs) like XSB allow Canadian investors to diversify their portfolios using a basket of fixed income assets

When compared to traditional mutual funds, ETFs have much lower management expense ratios (MER). This can help sustain higher gains over the long term.

Stocks and ETFs like XSB can easily be purchased on a discount brokerage in Canada like Wealthsimple Trade or Questrade. Both of these platforms offer no commission purchases of ETFs. 

In this XSB ETF review article, we will cover XSB’s holdings, performance, fees, peer comparison, pros and cons, and how to purchase it in Canada.

What is XSB?

XSB is the Blackrock iShares Core Canadian Short Term Bond Index ETF that trades on the Toronto Stock Exchange.

The fund, which started trading on November 20, 2000, is designed to track the benchmark FTSE Canada Short Term Overall Bond Index. 

XSB holds low-cost, investment-grade bonds that offer short-term maturities that range from 1 to 5 years.

Its intent is to be a stable, fixed-income asset that pays regular monthly distributions with a low interest rate risk.

Here are some key facts for XSB as of June 2022:

  • Inception date: November 20, 2000
  • Number of holdings: 539
  • Weighted Average YTM: 3.60%
  • Weighted Average Coupon: 2.21%
  • Weighted Average Maturity: 3.19 years
  • Management fee: 0.09%
  • MER: 0.10%
  • 12-month trailing yield: 2.14%
  • Distribution yield: 2.18%
  • Distribution frequency: Monthly
  • Eligible accounts: RRSP, TFSA, RRIF, TFSA, DPSP, RDSP
  • Currency: CAD

XSB Holdings

Since XSB is a short-term bond ETF, it primarily holds Canadian-issued bonds with a maturity of between 1-5 years.

XSB is an all-bond ETF which gives it a low-risk rating and it can be a long-term core holding of your portfolio.

The fund holds a total of 539 different bonds as of June 2022. Here are the top 10 issuers of these bonds:

Bond Issuer NameWeighted Allocation in XSB
Government of Canada26.44%
Canada Housing Trust NO.115.35%
Province of Ontario9.42%
Province of Quebec3.92%
The Toronto Dominion Bank3.47%
Royal Bank of Canada2.88%
Bank of Montreal2.52%
Canadian Imperial Bank of Commerce2.40%
Bank of Nova Scotia2.40%
Province of Alberta2.17%

And here are the top 10 bond holdings XSB by individual weighted allocation:

Bond Issuer NameWeighted Allocation in XSB
Government of Canada2.61%
Canada Housing Trust NO.1 144A2.15%
Government of Canada2.11%
Government of Canada1.89%
Government of Canada1.79%
Government of Canada1.76%
Province of Ontario1.76%
Government of Canada1.75%
Canada Housing Trust NO.1 144A1.66%
Canada Housing Trust NO.1 144A1.62%

And here are the maturities for XSB by the percentage of fund allocation:

Time to Maturity% of XSB Market Value
0-1 Years0.20%
1-2 Years28.90%
2-3 Years25.87%
3-5 Years42.02%
5-7 Years0.09%
7-10 Years2.18%
20+ Years0.38%
Cash and Derivatives0.36%

Finally, here is the credit quality breakdown of the bond holdings in the XSB ETF:

Credit Type% of XSB Market Value
AAA46.71%
AA21.74%
A18.27%
BBB11.84%
Cash and/or Derivatives0.36%
Other1.08%

XSB Returns and Performance

Fixed-income ETFs like XSB are not generally held for long-term capital growth, rather they are attractive for stable price performance and regular distributions.

Since its inception, XSB has had an annual average return of 3.46% and a cumulative return of 107.92%.

Here is how XSB has performed compared to the benchmark FTSE Canada Short Term Overall Bond Index:

 YTD1 Month3 Month6 Month1 year3 year5 Year10 YearInception
XSB Total Return-3.70%0.22%-2.59%–3.34%-4.35%0.75%3.89%14.24%107.92%
Benchmark Total Return-3.64%0.24%-2.56%-3.29%-4.23%1.07%4.40%16.26%109.06%
iShares Core Canadian Short Term Bond Index ETF

XSB Fees

As with most fixed-income ETFs, XSB has relatively low management fees for its holders.

The management fee for XSB sits at 0.09% and the MER is 0.10%.

This is significantly lower compared to what you pay the average equity mutual fund manager in Canada (1.98%).

Pros and Cons of iShares XSB ETF

XSB offers Canadian investors a low-cost way of having exposure to the Canadian short-term bond market.

This iShares ETF provides relative portfolio stability as well as regular, monthly distributions that provide a nice steady cash flow.

It has much lower management fees and MER than the standard mutual fund fees in Canada.

With that being said, fixed-income assets do not provide much in terms of long-term capital growth.

An all-bond ETF shouldn’t be the only holding in your long-term portfolio. Diversifying with stocks or equity ETFs for capital growth is one way to diversify your investments.

XSB vs. VSB

VSB is the Vanguard Canadian Short-Term Bond Index ETF that also trades on the Toronto Stock Exchange.

The ETF has slightly higher fees with a management fee of 0.10% and an MER of 0.11%.

The Vanguard Canadian Short-Term Bond Index ETF holds a total of 477 bonds with an average maturity term of 3.0 years.

VSB pays a monthly distribution frequency with a 12-month trailing yield of 2.08%. Learn more in this detailed review.

XSB vs. ZAG

ZAG is the BMO Aggregate Bond Index ETF that was established in January of 2010. It trades in CAD on the Toronto Stock Exchange.

This ETF has lower fees than XSB with a management fee of 0.08% and an MER of 0.09%.

It holds a total of 1,426 bonds with a Weighted Average Term of 10.35 years.

ZAG pays a monthly distribution frequency with an annualized distribution yield of 3.45%.

XSB vs. XSH

XSH is another Blackrock iShares ETF. It is the iShares Core Canadian Short-Term Corporate Bond Index ETF and trades on the Toronto Stock Exchange.

The fees for this ETF are the same as for XSB which is a management fee of 0.09% and an MER of 0.10%.

The fund holds a total of 430 bonds with a Weighted Average Maturity of 3.86 years.

XSH also pays a monthly distribution with a 12-month trailing yield of 2.82%.

How To Buy the iShares XSB ETF in Canada

You can easily purchase XSB using Questrade or Wealthsimple Trade.

Questrade

Questrade is an online discount brokerage that was established in 1999 and is available to Canadian investors.

This platform offers trading for most assets including stocks, ETFs, bonds, mutual funds, options, and GICs.

ETF purchases are free for Questrade users although there is a min. $4.95 fee for selling those ETFs.

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Wealthsimple Trade

This Toronto-based discount brokerage is majority-owned by the Power Corporation of Canada and was founded in 2014.

It provides commission-free trading for stocks, ETFs, mutual funds, and other investment assets.

Wealthsimple offers easy-to-use and intuitive apps for both desktop and mobile devices.

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QTrade

QTrade is another discount brokerage platform that is based out of Vancouver, British Columbia.

This platform provides lower-cost investment fees for assets like stocks, ETFs, and mutual funds.

It offers commission free trading for a list of specified ETFs. While XSB is not on this list, other iShares Bond ETFs like XQB, XIG, XGB, and XRB are available.

Qtrade

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Is XSB a Good Buy?

As a fixed income ETF, XSB could have a role in a diversified portfolio as a stabilizer with steady, monthly cash flow through distributions.

Short-term bonds actually show less volatility and have less sensitivity to changes in interest rates.

XSB has a proven record of returns on investment and is an excellent holding during times of market volatility and negative sentiment.

XSB ETF Review FAQs

Is XSB a good investment?

In terms of stable monthly income and minimizing capital losses, XSB is a good investment for Canadian investors. Investors should not expect high levels of long-term capital growth from XSB, but rather more of a hedge to market volatility.

Does XSB pay dividends?

Yes! These dividends are known as distributions and are paid out on a monthly basis. Monthly distributions are one of the more appealing features of fixed-income ETFs like XSB. XSB has a distribution yield of 2.18% on an annualized basis and a 12-month trailing yield of 2.14%. 

How do I buy bond ETFs on a brokerage platform?

Bond ETFs can be purchased like any other exchange-traded funds or stocks. Simply search for the ticker symbol of the ETF, like XSB, and specify the number of shares you wish to purchase.

Buying bond ETFs on a discount brokerage like Wealthsimple Trade or Questrade will help save on trading fees and can make a difference when it comes to long-term gains.

Related: Safe Investments With High Returns.

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Author

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Enoch Omololu

Enoch Omololu is a personal finance expert and a veterinarian. He has a master’s degree in Finance and Investment Management from the University of Aberdeen Business School (Scotland) and has completed several courses and certificates in finance, including the Canadian Securities Course. He also has an MSc. in Agricultural Economics from the University of Manitoba and a Doctor of Veterinary Medicine degree from the University of Ibadan. Enoch has a passion for helping others win with their personal finances and has been writing about money matters for over a decade. He has been featured or quoted in The Globe and Mail, Winnipeg Free Press, Wealthsimple, Financial Post, Toronto Star, CTV News, Canadian Securities Exchange, Credit Canada, National Post, CIBC, and many other personal finance publications.

His top investment tools include Wealthsimple and Questrade. He earns cash back on purchases using KOHO, monitors his credit score for free using Borrowell, and earns interest on savings through EQ Bank.

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