ISHARES CANADIAN SHORT-TERM BOND INDEX ETF $28.47

ISHARES CANADIAN SHORT-TERM BOND INDEX ETF $28.47 (Toronto symbol XSB; buy or sell through brokers) mirrors the performance of the DEX Short-Term Bond Index. This index consists of a range of investment-grade federal, provincial, municipal and corporate bonds with one- to five-year terms to maturity. The fund holds 437 bonds with an average term to maturity of 2.94 years. The bonds in the index are 65.0% government and 35.0% corporate. The fund’s MER is 0.28%. The iShares Canadian Short-Term Bond Index Fund yields 2.4%, but this high yield is due to the fact that some of the fund’s bonds pay above-market interest rates. As a result, they trade above their face value. When these bonds mature, holders will only get the bonds’ face value, meaning the portfolio will incur predictable capital losses. These losses will offset some of the appeal of the above-market yields. The key figure when looking at the long-term return of this fund is yield to maturity. This yield takes into account the series of capital losses the fund will experience as its above-market-rate bonds mature. The yield to maturity for the iShares Canadian Short-Term Bond Index ETF is 1.21%. That’s less than the 2.4% yield but still higher than the 0.52% you’d earn by investing in, say, a one-year T-bill. If you want to invest in a bond fund, the iShares Canadian Short-Term Bond Index Fund is a buy.