That is the good news and the other advantages to BNDX as well. The ETF has an average duration of 6.6 years below the 7.41 years found on the iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEArca: LQD) and “most of the fund’s holdings were issued in countries whose central banks may be less likely to raise interest rates in the near term than the Federal Reserve. Bonds issued in the eurozone represent close to 53% of the fund’s portfolio. While the region has stabilized, it is struggling with an unemployment rate above 12% and anemic growth. Consequently, the European Central Bank is unlikely to raise interest rates in the near term,” according to Bryan.
BNDX uses one-month forward contracts on the dollar to hedge currency, a trait not found on rival global bond ETFs. The new fund charges 0.2% per year and allocates a combined 45% of its weight to Japan, France and Germany.
Vanguard Total International Bond ETF
ETF Trends editorial team contributed to this post.