ETF Spotlight: Vanguard Total Bond Market | ETF Trends

ETF Spotlight on Vanguard Total Bond Market ETF (NYSEArca: BND), part of an ongoing series.

Assets: $15.2 billion.

Objective: The Vanguard Total Bond Market ETF tries to reflect the performance of the Barclays Capital U.S. Aggregate Float Adjusted Index, which includes a wide range of public, investment-grade, taxable, fixed-income securities traded in the U.S., such as government, corporate, international, mortgage-backed and asset-backed securities and bonds.

What You Should Know:

  • Vanguard sponsors the fund.
  • BND has an expense ratio of 0.11%.
  • As of Feb. 29, the fund held 5086 securities.
  • Portfolio allocations by credit rating include: U.S. government 69.7%, Aaa 3.7%, Aa 5.3%, A 11.3% and Baa 10.0%.
  • Issuer allocations include: asset-backed 0.2%, commercial mortgage-backed 2.3%, finance 7.3%, foreign 5.6%, government mortgage-backed 27.2%, industrial 11.8%, other 0.6%, Treasury/agency 42.6% and utilities 2.4%.
  • The ETF has an average maturity of 7.2 years and an average duration of 5.1 years.
  • BND has a SEC yield of 2.17%.
  • The fund is down 1.3% over the past month, down 0.2% over the last three months but up 7% over the last year.
  • BND has fallen 0.1% below its 200-day exponential moving average.
  • “Vanguard Total Bond Market ETF BND tracks the Barclays Capital Aggregate Float-Adjusted Bond Index, widely used as a proxy for the U.S. investment-grade bond market,” according to Morningstar analyst Timothy Strauts.
  • “Investors worried about rising interest rates should note that the fund’s average effective duration (a measure of interest-rate sensitivity) usually floats between 4.0 and 5.0 years, meaning that a 1-percentage-point rise in rates will reduce BND’s price between 4% and 5%,” Strauts added.

The Latest News:

  • Last week, After Tuesday’s largest drop in almost three weeks, safe-haven Treasuries rebounded  on the weaker-than-expected Eurozone bond auctions and concern of lingering sovereign debt problems, reports Susanne Walker for Bloomberg.
  • “The problems in Europe aren’t over,” Sean Murphy, a trader at Societe Generale, said in the article. “We’re getting a re-think of the reaction to the FOMC minutes. It’s not as hawkish as was feared. The reality is that it’s more data dependent from here.”
  • The strengthening U.S. economy is diminishing the need for a central intervention.
  • Observers were hoping for a QE3 but some believe a Operation Twist 2 is more feasible.
  • “While further easing is obviously something that’s conceivable, I wouldn’t favor it unless conditions deteriorated quite substantially,” Fed Bank of Richmond President Jeffrey Lacker said in the article.

Vanguard Total Bond Market ETF

For past stories in this series, visit our ETF Spotlight category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.