Investing · ETF deep dive
VSB Vanguard Canadian Short-Term Bond Index ETF
The rate-shy bond fund: 1–5 year maturities cut duration to 2.7 years — a third of the aggregate’s — for ~0.4 points of yield.
Best for: Investors who want bond income with much less rate drama — including pre-retirees who remember 2022
Pros
- Duration 2.7 years — roughly one-third the aggregate’s rate sensitivity
- AAA-majority (53.6%) credit book
- YTM 3.3% keeps most of the aggregate’s yield with far less volatility
Cons
- Gives up ~0.4 points of YTM vs the aggregates
- 0.12% MER — pricier than its big siblings (still cheap)
- At this duration, compare seriously against a 1–2 year GIC paying more, guaranteed
What's inside VSB
| Underlying fund | Weight |
|---|---|
| Credit quality: AAA 53.6% · AA 23.1% · A 12.4% · BBB 10.8% | 100.0% |
| Top 10: all Government of Canada bonds | 25.0% |
~70% government-related · corporate ~30% (financials 18.4%) (Provider issuer table, Apr 30, 2026) · holdings as of April 30, 2026 (575 bonds)
The deep dive
Duration is the dial, and VSB sets it to 2.7: a one-point rate move swings this fund roughly 2.7% where ZAG swings ~7%. The 1–5 year Bloomberg index delivers a 53.6%-AAA book yielding 3.3% — most of the aggregate’s income at a fraction of its drama. This is what 2022 taught a generation of bond holders to ask for.
The honest competitor at this duration isn’t another fund — it’s the GIC table, where 1–2 year terms currently pay more than VSB’s YTM with zero price risk. VSB’s case is liquidity (sell any day) and convexity (gains if rates fall). The ladder-vs-fund decision is exactly our GIC ladder calculator’s territory.
The rest of the field
The rest of the field, one line each:
- ZAG — the $12.8B aggregate, 0.09% MER
- XBB — same index as ZAG, since 2000
- VAB — Bloomberg float-adjusted aggregate
- ZDB — the tax-aware aggregate for taxable accounts
- XSB — short-term (2.8yr duration), since 2000
- ZFL — long federal — 17yr duration, the rate bet
Frequently asked questions
What does VSB hold?
VSB holds 575 short-term (1–5yr) investment-grade Canadian bonds — led by Credit quality: AAA 53.6% · AA 23.1% · A 12.4% · BBB 10.8% at 100.0%, Top 10: all Government of Canada bonds at 25.0% (as of April 30, 2026 (575 bonds)). Credit and sector mix: ~70% government-related · corporate ~30% (financials 18.4%) (provider issuer table, apr 30, 2026). Weights drift between rebalances — bloomberg canadian government/credit 1–5 year float adjusted index · duration 2.7 yrs.
What does VSB cost?
Currently 0.10% management fee; 0.12% published MER (MER as of Dec 31, 2025). Canadian aggregate bond ETFs now cost just 0.09%–0.10% — specialty rungs more (ZFL 0.22%) — see the full comparison. At bond-level expected returns, every basis point matters: the MER calculator shows why.
Which account should hold VSB — and should it be a GIC instead?
Bond interest is fully taxed at your marginal rate, the least favourable treatment there is — so bond ETFs belong in an RRSP, RRIF or TFSA first (the deliberate exception is ZDB, engineered for taxable accounts). And before buying any bond fund for dated money, run the honest comparison: our live GIC table often pays more than a bond ETF's YTM with zero price risk — the fund's advantages are daily liquidity and gains if rates fall. The bonds guide walks the full decision.
The bottom line
The right bond fund for the rate-averse — once you’ve checked that a GIC ladder doesn’t simply pay you more for the same calm. Twin: XSB.
This page is for educational purposes only and is not investment advice. Fund facts were verified at Vanguard Canada's published fact sheets and product pages on June 10, 2026; holdings and weights are point-in-time and drift between rebalances; published MERs may lag recent fee changes (MER as of Dec 31, 2025). We deliberately do not compare or project returns. Read the fund facts document before buying. See our methodology.