Best fixed-income ETFs for 2020


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Six of our previous fixed-income All-star picks return: ZAG, VSB, VAB, ZDB, BXF, and XSB. (Again, refer to the accompanying charts for full ETF names.) This year the panel decided to remove the BMO Laddered Preferred Share ETF (ZPR) after yet another disappointing year of performance for preferred shares.

However, we added two new ETFs with a global and/or U.S. focus: the Vanguard Global Aggregate Bond Index ETF (CAD-Hedged, ticker VGAB), and the Nasdaq-listed iShares Barclays 20 Year + Treasury Bond ETF (TLT), one of the few All-stars not trading on a Canadian exchange. 

While not an official pick, BMO offers long-term treasuries in Canadian dollars by way of ZTL.

Launched Jan. 17, 2020, VGAB offers 15,000 government and corporate bonds across U.S. and global markets. Slightly under 50% of the fund is U.S. fixed income, while the rest is made of investment grade bonds from global markets, including almost 4% in Canada. It also includes a roughly 3% allocation in investment grade bonds from developing countries. Here is the blog post panelist Dale Roberts published shortly after VGAB was unveiled. 

(Note that the Vanguard asset allocation ETFs already provide exposure to U.S. and global bonds, hedged back to the Canadian dollar; VGAB is simply a combination of VBG and VBU, both hedged back to the Canadian dollar.) 

TLT invests in long-term U.S. treasuries. “You don’t fix a ship in a hurricane but, U.S. treasuries have been known to be better risk managers (many say the best outside of inverse ETFs),” notes Roberts. There are U.S.- and Canadian-dollar versions. 

Readers might also want to consider the mid-duration iShares Barclays US Dollar 7- to 10-year ETF (ticker IEF), also on the Nasdaq, but not designated an All-star. “Many portfolio managers I speak with and any simple research shows the benefit of U.S. long- and mid-term treasuries. I’m so glad I own them,” says Roberts. “Much better risk managers compared to Canadian bonds.”

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ETF Name Ticker Management Fee MER # of Holdings Description
BMO Aggregate Bond Index ETF ZAG 0.08 0.08 952 Broad universe of Canadian investment grade government and corporate bonds
Vanguard Canadian Aggregate Bond Index ETF VAB 0.08 0.09 991 High credit quality, moderate current income
Vanguard Canadian Short-term Bond Index ETF VSB 0.1 0.11 416 Canadian investment grade short-term Government & corporate bonds
BMO Discount Bond Index ETF ZDB 0.09 0.10 204 Tax-friendly alternative for non-registered accounts
First Asset 1-5 Year Laddered Government Strip Bond Index ETF (BXF) BXF 0.2 0.23 25 Unique structure beats other short-term bond funds after tax
iShares Core Canadian Short Term Bond Index ETF XSB 0.09 0.10 477 Slightly cheaper than VSB, similar credit risk and rating profiles
NEW: Vanguard Global Aggregate Bond Index ETF (CAD Hedged) VGAB 0.30 N/A N/A Just launched, invests in global bonds hedged back to the C$, rated low-risk
NEW: iShares Barclays 20 Year + Treasury Bond ETF TLT (Nasdaq) 0.15 0.15 38 Long-term US treasury bonds, trades on Nasdaq

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