Investing · ETF deep dive
ZAG BMO Aggregate Bond Index ETF
The default Canadian bond fund: the whole investment-grade market for 0.09%, in the category’s biggest wrapper.
Best for: Anyone who wants “the bond market” in one ticker and nothing fancier
Pros
- Biggest aggregate in Canada ($12.8B) at a 0.09% MER
- 1,852 bonds, ~76% government, AA-quality core
- YTM 3.67% with monthly distributions and daily-published stats
Cons
- 6.9-year duration means real rate sensitivity — 2022 proved it
- Interest is fully taxed — wrong fund for a non-registered account (see ZDB)
- Identical index to XBB — pick on fee/size, not exposure
What's inside ZAG
| Underlying fund | Weight |
|---|---|
| Credit quality: AAA 44.8% · AA 28.7% · A 15.8% · BBB 10.7% | 100.0% |
| Largest single bond: Gov of Canada 2.75% 09/2030 | 1.6% |
Federal 43.5% · Provincial 30.4% · Corporate 24.3% — ~76% government (Provider sector table, Jun 9, 2026) · holdings as of June 9, 2026 (1,852 bonds)
The deep dive
ZAG tracks the FTSE Canada Universe Bond Index — every investment-grade Canadian bond over a year to maturity: 43.5% federal, 30.4% provincial, 24.3% corporate, 1,852 issues, AA average quality. At a 0.09% MER it is the cheapest serious way to own Canadian fixed income, and BMO publishes its portfolio statistics daily.
The numbers that govern it: YTM 3.67% (the forward-looking yield) and duration 6.91 years (a 1-point rate rise costs roughly 7% of price, and vice versa). That duration is the feature and the risk — it’s what made aggregates fall double digits in 2022, and what gives them upside when rates fall. For money with a known date, compare the locked alternative: our live GIC table currently pays more at the long end than ZAG’s YTM, with zero liquidity.
The rest of the field
The rest of the field, one line each:
- XBB — same index as ZAG, since 2000
- VAB — Bloomberg float-adjusted aggregate
- ZDB — the tax-aware aggregate for taxable accounts
- VSB — short-term (2.7yr duration)
- XSB — short-term (2.8yr duration), since 2000
- ZFL — long federal — 17yr duration, the rate bet
Frequently asked questions
What does ZAG hold?
ZAG holds 1,852 investment-grade Canadian bonds (FTSE Universe) — led by Credit quality: AAA 44.8% · AA 28.7% · A 15.8% · BBB 10.7% at 100.0%, Largest single bond: Gov of Canada 2.75% 09/2030 at 1.6% (as of June 9, 2026 (1,852 bonds)). Credit and sector mix: Federal 43.5% · Provincial 30.4% · Corporate 24.3% — ~76% government (provider sector table, jun 9, 2026). Weights drift between rebalances — ftse canada universe bond index — the broad canadian investment-grade market · duration 6.91 yrs.
What does ZAG cost?
Currently 0.08% management fee; 0.09% published MER (page as of Jun 9, 2026). 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 ZAG — 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
If a portfolio needs one bond fund inside an RRSP, RRIF or TFSA, this is the boring, correct ticket. Taxable account? Read ZDB first. Nervous about rates? Shorten.
This page is for educational purposes only and is not investment advice. Fund facts were verified at BMO ETFs'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 (page as of Jun 9, 2026). We deliberately do not compare or project returns. Read the fund facts document before buying. See our methodology.