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3 minutes to read by Rachel Siu, Director, Fixed Income Strategy, BlackRock Canada Mar 5, 2025

Highlights from a recent conversation with Rachel Siu, Head of Canadian Fixed Income, BlackRock Asset Management Canada Limited. Rachel shares her perspective on how to approach fixed income investing in this evolving market environment.

A year of rate cuts and market shifts

Many global central banks, including the Bank of Canada, began cutting rates in 2024 as inflation began to slow. Canada, being more rate-sensitive, saw larger rate cuts compared to other economies, including the United States. The latest CPI (Consumer Price Index) figures reflect that inflation is within the Bank of Canada’s target (1 – 3%), keeping the door open for further rate normalization . With declining yields, Canadian fixed income performed well in 2024. The FTSE Canada Universe Bond Index returned over 4% in 2024, thanks to lower front-end yields and tightening credit spreads.

Fixed income ETFs had a banner year

In 2024, Canadian fixed income ETFs saw record-breaking inflows as investors sought to capitalize on attractive bond yields. Demand was strong for high-quality core fixed income and income-focused investments.

Looking ahead: What 2025 holds

With President Trump’s re-election, uncertainty looms around tariffs and trade policies. Markets expect the Bank of Canada to continue cutting rates, with at least one or two more reductions expected in 2025, barring economic disruptions from trade policies.

How to approach fixed income in this environment

Overall yields remain attractive across the fixed income spectrum, though volatility is elevated. With increased market uncertainty, BlackRock sees an opportunity for investors to take a more tactical approach — being selective with geographic and sector exposures. Dispersion across markets means there’s opportunity in being nimble and diversifying across regions and sectors.

Where can advisors find the best income opportunities?

Investor demand for reliable income remains strong, especially as the number of retirees grows. The good news? Investors can still build well-diversified fixed income portfolios that can offer attractive income without excessive risk in today’s environment.

Watch Rachel Siu's recent webinar: 2025 Strategy Fixed Income positioning (Advisors only)

Introducing iShares Flexible Monthly Income ETF

Launched in Canada in September 2024, iShares Flexible Monthly Income ETF (XFLX) is designed to maximize income while diversifying across global fixed income sectors. The fund has gained strong momentum among investors looking for attractive yields without excessive credit or duration risk.

• Weighted average yield-to-maturity 6.2%

• Average credit quality: BBB

• Duration: 2.5 years

• Managed by: BlackRock’s Fundamental Fixed Income Investment team, led by Rick Rieder

• Sector exposure: Non-traditional fixed income sectors such as European credit, securitized assets, bank loans, high yield and collateralized loan obligations

• Risk control: Risk is thoughtfully sized and deliberately diversified across the global opportunity set

Why XFLX?

XFLX prioritizes income while limiting exposure to core sectors like U.S. Treasuries and U.S. investment-grade corporate bonds (capped at 20%). This ensures a well-balanced mix of global credit opportunities while aiming to provide strong risk-adjusted returns. The strategy has seen significant success in the United States, gathering over US $8 billion in assets since May 2023.

As we move into 2025, staying flexible with fixed income allocations will be crucial. Investors who embrace global diversification and active risk management may be well positioned to navigate the evolving landscape.

Related ETFs

XFLX iShares Flexible Monthly Income ETF (CAD-Hedged)

XFLI iShares Flexible Monthly Income ETF

XFLI.U iShares Flexible Monthly Income ETF (USD Units)

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Disclosure

Disclosures


The information and opinions herein are provided for informational purposes only and represent the views of BlackRock Inc. and do not necessarily represent the views of RBC Global Asset Management Inc.



Publication date: February 2025



Investing involves risk, including possible loss of principal.



RBC iShares ETFs are comprised of RBC ETFs managed by RBC Global Asset Management Inc. and iShares ETFs managed by BlackRock Asset Management Canada Limited ("BlackRock Canada").



Commissions, trailing commissions, management fees and expenses all may be associated with investing in exchange-traded funds (ETFs). Please read the relevant prospectus before investing. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. ETFs are not guaranteed, their values change frequently and past performance may not be repeated. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional.



The iShares ETFs are not connected, sponsored, endorsed, issued, sold or promoted by Bloomberg Finance L.P. and its affiliates, including Bloomberg Index Services, Limited (“Bloomberg”), Cohen & Steers Capital Management Inc., London Stock Exchange Group plc and its group undertakings (“LSE Group”, ICE Data Indices, LLC., ICE Benchmark Administration Limited, Jantzi Research Inc., Markit Indices Limited, Morningstar, Inc., MSCI Inc., MSCI ESG Research and Bloomberg, NASDAQ OMX Group Inc., NYSE FactSet or S&P Dow Jones Indices LLC. (“S&P”). None of these companies make any representation regarding the advisability of investing in the iShares ETFs. BlackRock Asset Management Canada Limited is not affiliated with the companies listed above.



The Prospectus contains a more detailed description of the limited relationship the companies have with BlackRock Asset Management Canada Limited and any related ETFs.



® / TM Trademark(s) of Royal Bank of Canada. Used under licence. iSHARES is a registered trademark of BlackRock, Inc., or its affiliates. Used under licence. © 2025 BlackRock Asset Management Canada Limited and RBC Global Asset Management Inc. All rights reserved

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® / TM Trademark(s) of Royal Bank of Canada. Used under licence. iSHARES is a registered trademark of BlackRock, Inc., or its subsidiaries in the United States and elsewhere. Used under licence. © 2025 RBC Global Asset Management Inc. and BlackRock Asset Management Canada Limited. All rights reserved.
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