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  5. ZAG: What will be the impact of the Bank of Canada's likely rate cut from 2. [BMO Aggregate Bond Index ETF]
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Q: What will be the impact of the Bank of Canada's likely rate cut from 2.75% to 2% on the ZAG or XBB ETFs?
Is it better to simply buy bonds directly rather than ETFs?

Asked by Serge on June 09, 2025
5i Research Answer:

Rate cuts 'typically' have a positive impact on bond prices, but often this is priced in ahead of time and there may not be a move on the actual day of a rate cut. But, generally speaking, as rates go down bond pricing goes up. For most investors, we would still prefer ETFs. It can be difficult and time-consuming to build up a proper and diversified bond portfolio. 

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