This month, the global investment community is celebrating the 25th anniversary of the world’s first fixed income ETFs, the iShares Core Canadian Short Term Bond Index ETF (XSB) and the iShares Core Canadian Universe Bond Index ETF (XBB). On November 20, 2000, the funds XSB and XBB began trading on the Toronto Stock Exchange.

At the time, they were quiet experiments in a corner of the market many believed was too complex to be democratized. Today, their influence spans a global fixed income ETF ecosystem that has grown to thousands of products and trillions in assets.

The bond market that XSB and XBB covered was not built for transparency or accessibility. Pricing was opaque, trading was infrequent, and participation was dominated by institutions with the scale and dealer relationships required to navigate it. Bringing that world into an exchange-traded product required not only structural innovation but also a willingness to rethink how fixed income could function for everyday investors.

Those involved in the launch still remember the uncertainty. Many questioned whether the daily creation and redemption process could work in an asset class where some securities hardly traded. Others doubted whether an index could be priced accurately enough to support an ETF. There was no ready-made model to follow. Regulators, index providers, portfolio managers, and market makers had to build an entirely new framework, often collaborating across firms that typically competed with each other.

Despite the challenges, XSB and XBB proved the concept. Their success helped define the foundation on which the modern fixed income ETF market was built. What began with two listings on the TSX ultimately sparked a shift in how investors around the world access bonds.

XSB and XBB Today

XSB, which now manages $3.4 billion in assets, has become a popular choice for investors seeking stability and lower interest-rate sensitivity. With several hundred holdings and a duration of roughly three years, the fund offers a conservative approach to fixed income while still providing steady income. Its mix of federal, provincial, and investment-grade corporate bonds makes it a straightforward way to manage rate risk without sacrificing diversification. The low 0.10% fee continues to reinforce its role as a dependable core holding.

With $9 billion in assets under management and more than a thousand underlying securities spanning government, provincial, municipal, and corporate issuers, XBB offers a broad and highly diversified approach for long-term fixed income investors. Its longer duration profile positions it to benefit more meaningfully during periods of declining yields. And, like XSB, its low cost helps ensure it remains a competitive and dependable anchor within fixed income portfolios.

What’s Happening in the Fixed Income Market

The fixed income ETF landscape has expanded dramatically, yet XSB and XBB remain among the most widely used. Their long track records and straightforward design make them staples for advisors constructing balanced portfolios. Institutions also rely on them for liquidity, hedging, and tactical positioning. For retail investors, they continue to offer something the traditional bond market rarely has: transparency, convenience, and instant diversification through a single trade.

The broader fixed income environment has undergone major shifts in recent years. Rapid rate tightening, followed by expectations of easing, has pushed investors to think more carefully about duration. Short-term bond ETFs such as XSB have benefited from elevated yields and reduced rate sensitivity. Meanwhile, broad-market strategies like XBB have seen renewed interest as investors prepare for potential declines in interest rates.

Fixed income ETFs have also become essential tools during periods of market volatility. Their trading volumes frequently exceed trading in the underlying cash bonds, providing a real-time picture of market sentiment and pricing. This has reshaped how institutions manage fixed income exposure and has strengthened confidence in the role ETFs play in liquidity management.

BlackRock Celebrates 25 Years of Fixed Income

The legacy of those early launches was celebrated at the TSX earlier this month. Steven Leong, head of product at BlackRock Canada, joined Graham MacKenzie, managing director of exchange-traded products at the TSX. Gerry Rochi, whose contributions were instrumental in bringing the funds to market, also joined.

Twenty-five years on, the story is still unfolding. XSB and XBB helped open the doors to fixed income for everyday investors. They set the stage for one of the most significant transformations in modern investing. The next chapter of bond market innovation continues to build on the foundation they laid.

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