1.iShares Core Canadian Universe Bond ETF
XBB (TSX)
Earning a Silver Morningstar rating, the iShares Core Canadian Universe Bond ETF (XBB) tracks the FTSE Canada Universe Bond Index, focusing on a wide array of investment-grade bonds. Currently, it offers a dividend yield of 3.38%, although it has experienced a 1-year return of -0.81% and a more significant decline of -14.56% over the past five years. With low volatility, XBB may appeal to investors seeking stability in their bond investments despite its recent performance challenges.
Pros:
- Silver-rated by Morningstar
- Comprehensive investment-grade bonds exposure
Cons:
- Negative 1-year and 5-year returns
- Market volatility risk
2.BMO Aggregate Bond Index ETF
ZAG.TO (TSX)
The BMO Aggregate Bond Index ETF (ZAG) stands out as a top-rated Canadian bond ETF, boasting an ultra-low management expense ratio (MER) of 0.09%. With a dividend yield of approximately 3.46%, it offers investors a solid option for stability and rebalancing through its diverse exposure to both government and corporate bonds. Despite a 1-year return of -0.79% and a 5-year return of -15.91%, ZAG remains an attractive choice for those prioritizing consistent income and portfolio diversification.
Pros:
- Broad diversification in government and corporate bonds
- Ideal for stability and rebalancing
Cons:
- Negative 1-year and 5-year returns
- Market volatility risk
3.Vanguard Canadian Aggregate Bond Index ETF
VAB.TO (TSX)
The Vanguard Canadian Aggregate Bond Index ETF (VAB) offers a cost-effective way to gain exposure to a broad range of Canadian investment-grade bonds, with a low management expense ratio of 0.09%. Although it has faced a -0.69% return over the past year and a -14.57% return over five years, it remains an attractive option for those seeking reliable monthly income, currently delivering a dividend yield of 3.33%. VAB's strong credit quality is reflected in its holdings, with 44.2% rated AAA and 35.4% rated AA, providing a solid foundation for investors concerned about market risks.
Pros:
- Cost-effective exposure to aggregate market
- Tracks broad Canadian investment-grade bonds
Cons:
- Negative 1-year and 5-year returns
- Market risk due to economic trends
Final Words
As you consider the best bond ETFs this February 2026 in Canada, remember that options like the BMO Aggregate Bond Index ETF offer stability and diversification. Take time to compare these investment choices and conduct your own research to find the best fit for your financial goals.
Frequently Asked Questions
The BMO Aggregate Bond Index ETF (ZAG.TO) is a Canadian bond ETF known for its ultra-low management expense ratio (MER) of 0.09%. It offers broad diversification in government and corporate bonds, making it ideal for investors seeking stability.
As of January 2026, the BMO Aggregate Bond Index ETF has shown a YTD return of 0.87% and a 1-year return of -0.79%. Its recent 3-month return was -1.70%, indicating some volatility in the short term.
The BMO Aggregate Bond Index ETF currently has a dividend yield of 3.46%, with monthly distributions. The next dividend payment is scheduled for February 3, 2026, at a rate of $0.0390.
The BMO Aggregate Bond Index ETF aims to replicate the performance of the FTSE Canada Universe Bond Index™, net of expenses. It primarily invests in investment-grade bonds with maturities greater than one year.
Bond ETFs, including ZAG, carry risks such as interest rate risk, credit risk, and market risk. Changes in interest rates can negatively impact bond prices, and there is always potential for default on corporate bonds.
When selecting a bond ETF, consider factors such as the ETF's expense ratio, the types of bonds it holds, its historical performance, and the yield. Diversification and alignment with your investment goals are also key considerations.
