Getting the right amount of bond exposure while simultaneously getting enough yield doesn’t have to be a trying task when Vanguard offers intermediate bond ETFs for consideration.
Intermediate exposure can give fixed income investors the sweet spot when it comes to duration to minimize credit risk while also obtaining more yield that shorter bond maturities can’t offer. Two Vanguard funds to consider are the Vanguard Intermediate-Term Treasury Index Fund ETF Shares (VGIT) and the Vanguard Interim-Term Corporate Bond ETF (VCIT).
Both ETFs consist of bond holdings that don’t exceed more than 10 years in their maturity dates. This keeps investors from getting too far out on the yield curve or, conversely, stuck in a short position as the capital markets eye the Federal Reserve’s next moves on interest rates.
Up first is VGIT, which gives investors exposure to safer debt issues with Treasury notes. Per the fund description, VGIT seeks to track the performance of a market-weighted Treasury index with an intermediate-term dollar-weighted average maturity.
The fund employs an indexing investment approach designed to track the performance of the Bloomberg U.S. Treasury 3-10 Year Bond Index. This index includes fixed income securities issued by the U.S. Treasury (not including inflation-protected bonds) with maturities between three and 10 years.
VGIT:
- Seeks to provide a moderate and sustainable level of current income.
- Invests primarily in U.S. Treasury bonds.
- Offers moderate interest rate risk, with a dollar-weighted average maturity of five to 10 years.
A Corporate Bond Option
Though credit spreads have been tightening as of late due to rising yields, corporate bonds like VCIT can still give fixed income investors that added dose of yield. The fund seeks to track the performance of a market-weighted corporate bond index with an intermediate-term dollar-weighted average maturity.
The fund employs an indexing investment approach designed to track the performance of the Bloomberg U.S. 5-10 Year Corporate Bond Index. This index includes U.S. dollar-denominated, investment-grade, fixed-rate, taxable securities issued by industrial, utility, and financial companies with maturities between five and 10 years.
VCIT:
- Seeks to provide a moderate and sustainable level of current income.
- Invests primarily in high-quality (investment-grade) corporate bonds.
- Boasts moderate interest rate risk with a dollar-weighted average maturity of five to 10 years.
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