Top 10 Best Popular Bond ETF Exchange Traded Funds

Top Bond ETF Logo
Top Bond ETF Logo

Intro

ETF or Exchange Traded Fund investment has become popular among long term investors and traders due to its liquidity. Long term investor can invest in sector ETFs to avoid sudden price movement due to stocks volatility. It provides a method for investor to diversify its investment portfolio with a small fraction of cost. In my previous article, I have provided various article about top 10 ETF, how to invest in ETF, and more. In this Article, I’ll provide Top 10 best Bond Exchange Traded Funds list.

Similar to mutual fund, ETF (exchange traded fund) also can be classified into two main categories such as Stock ETF or Equity ETF and Bond ETF or Fixed Income ETF. Stock ETF can be classified into 3 main categories such as Domestic Stock ETF, International Stock ETF and Emerging Markets Stock ETF. More details on these equity ETFs on my next article.


Bond ETFs

Bond ETF can be classified into 2 main categories such as taxable bond ETF and non taxable bond ETF or Muni bond ETFs. Taxable bond ETF can divide into short term bond, intermediate term bond, and long term bond ETF including Corporate Bond ETF, High Yield Bond ETF, Government ETF or Treasuries. The other bond ETFs are non taxable bond ETF or municipal bond ETF. The municipal bond has advantages especially for people that pay high income tax on Federal and state level since these Bond ETFs yield or distribution are tax free or tax exempt from federal tax and possible state tax.

Please make a note, there are also sector ETFs. These sector ETFs may include a hybrid of bond and stock ETF as well as domestic & international ETF. Some of sectors ETF include Precious Metals ETF, REIT ETF, Technology ETFs and more.


Fund Selection Criteria

The Top 10 best bond ETF list is created by using the following criteria. First, I look at the total asset of the ETF. It has to be the largest ETF which means retail investor or institutional investor has confident to invest in this ETF. Secondly, it has rated by Morningstar. Since most of the ETF is still new and just rated, I wouldn’t that worry about the Morningstar rating. But some of these ETF has more than 3 stars rating from Morningstar. I have gathered all the information from Morningstar ETF screener and Yahoo Finance. All information is updated as of January 31st, 2011. Note: Most of ETFs are passively managed and track its index benchmark. The following is Top 10 Best Bond ETF list:

  1. iShares Barclays TIPS Bond
  2. iShares iBoxx $ Invest Grade Corp Bond
  3. iShares Barclays Aggregate Bond
  4. Vanguard Total Bond Market ETF
  5. iShares iBoxx $ High Yield Corporate Bd
  6. iShares Barclays 1-3 Year Treasury Bond
  7. iShares Barclays 1-3 Year Credit Bond
  8. SPDR Barclays Capital High Yield Bond
  9. Vanguard Short-Term Bond ETF
  10. iShares Barclays Short Treasury Bond

Note: You may need a brokerage to buy these ETFs, please check my article on different rokerage such as Fidelity Brokerage, Vanguard Brokerage, Scottrade and more

Top Bond ETF List

(click column header to sort results)
No  
Fund Description  
Ticker  
Fund Type  
Expense Ratio  
Yield  
Assets (B)  
Morningstar Rating  
1
iShares Barclays TIPS Bond
TIP
Inflation Protected Bond
0.20%
2.51%
19.06
4
2
iShares iBoxx $ Invest Grade Corp Bond
LQD
Long Term Bond
0.15%
4.86%
12.7
3
3
iShares Barclays Aggregate Bond
AGG
Intermediate Term Bond
0.20%
2.71%
11.07
3
4
Vanguard Total Bond Market ETF
BND
Intermediate Term Bond
0.12%
3.46%
8.93
3
5
iShares iBoxx $ High Yield Corporate Bd
HYG
High Yield Bond
0.50%
8.17%
8.15
2
6
iShares Barclays 1-3 Year Treasury Bond
SHY
Short Government
0.15%
1.03%
8.05
3
7
iShares Barclays 1-3 Year Credit Bond
CSJ
Short Term Bond
0.20%
2.47%
7.51
4
8
SPDR Barclays Capital High Yield Bond
JNK
High Yield Bond
0.40%
9.06%
7.2
2
9
Vanguard Short-Term Bond ETF
BSV
Short Term Bond
0.12%
2.22%
5.84
4
10
iShares Barclays Short Treasury Bond
SHV
Short Government
0.15%
0.08%
4.13
1
updated 2/14/2011
TIP ETF Overview
TIP ETF Overview

1. iShares Barclays TIPS Bond Fund

The iShares Barclays TIPS Bond ETF is one of the popular bonds ETF which is part of iShares ETF offered by BlackRock. This TIPS fund seeks results to replicate the Barclays Capital U.S.Treasury Inflation Protected Securities (TIPS) index performance, before fees and expenses. This bond fund invests majority of its assets (>90%) in the inflation-protected bonds similar to its index and at least 95% of the assets in U.S. government bonds. It may also invest up to 10% of assets in U.S. government bonds not included in the underlying index.

IShares Barclays TIPS Bond TIP is ideal for investors looking for easy and low cost trade to Treasury Inflation-Protected Securities or TIPS. The fund provides a laddered structure with the underlying index holding securities that range from 1 year to 20 years in duration. The current expense ratio is only 0.20% per year for this passively managed ETF.

As of January 31, 2011, there are 31 bond holdings in this TIPS ETF. The adjusted duration is 5.06 year. The primary portfolio consists of medium interest rate sensitivity and high credit quality bond. The top holding consists of both US Treasury Bond and US Treasury note with different yields and maturity years.


2. iShares iBoxx $ Invest Grade Corp Bond

The iShares iBoxx $ Investment Grade Corporate Bond Fund’s objective is to achieve investment results that correspond generally to the price and yield performance of the investment grade corporate bond market, before expense and fee. This corporate bond ETF is tracking the iBoxx $ Liquid Investment Grade Index. The fund expense ratio is 0.15% per year. There are 597 bond holdings in this ETF. The average credit rating of this fund is BBB+, investment grade bonds. It also has a total net asset of 12.72 billion. The effective duration of this investment grade corporate bond ETF is 7.05 years. It also has a yield of 4.90% per year. If you are interested, Fidelity brokerage also offer 25 iShares ETFs for free. This Corporate ETF is one of the 25 iShares ETFs offered by Fidelity for free trades.

As of February 14, 2011, the top 5 sectors diversification of this fund include Bank corporate bonds, Oil & Gas Producers debts, Fixed line telecommunication bonds, Media companies debts, and Pharmaceuticals & Biotechnology bonds. The Top 10 corporate holding include AT&T Inc, Wells Fargo & Co, JP Morgan Chase & Co, American International Group (AIG), Citigroup Inc, Goldman Sachs Group, Wal-Mart Stores Inc, General Electric Capital Corporation and Verizon Communication.


3. iShares Barclays Aggregate Bond Fund

This iShares Barclays Aggregate Bond ETF is also a passive ETF or index ETF. This iShares Barclays Aggregate Bond ETF investment seeks investment results replicate the performance of the total United States investment grade bond market as defined by the Barclays Capital U.S. Aggregate index. The fund invests most of its assets (about 90%) in the bonds represented in the underlying index. The average credit rating of this fund is A+, investment grade bonds. The effective duration of this aggregate bond ETF is 4.66 years. It also has a yield of 2.73% per year. It also has a total net asset of 11.07 billion.

As of February 2011, the top 5 debt sectors include treasuries (33.20%), Mortgage Backed Securities (MBS) Passthrough (31.62%), Industrial bonds (9.71%), agencies debts (8.08%), and financial institutions bonds (6.23%). The Top 10 daily holdings in this iShares ETF include US Treasuries and Federal Home Loan Mortgage at different maturity and yields.


Vanguard Total Bond Market ETF
Vanguard Total Bond Market ETF

4. Vanguard Total Bond Market ETF

Vanguard has been very aggressive in promoting its ETF products. Long term investors have liked Vanguard ETFs due to its low cost. Similar to Vanguard mutual fund approach, this Vanguard Total Bond Market ETF also employs indexing investment approach or passive management. This Vanguard ETF is designed to track the performance of the Barclays Capital U.S. Aggregate Float Adjusted Index. It also invest >80% of its asset in bond held in its index. The expense ratio of this fund is only 0.12% per year. The fund has a total net asset of 9.00 billion. The average credit rating of this fund is AA, investment grade bonds. The effective duration of this aggregate bond ETF is 5.10 years. It currently has a yield of 3.46% per year. To invest in Vanguard ETF, you can open Vanguard Brokerage Services through www.Vanguard.com website.

As of February 2011, the top 5 debt sectors diversification include Treasury/ Agency debt, Government Mortgage Backed bond, Industrial debt, finance debt, and foreign debt. There are 4778 number of bonds in this ETF. The top bond holdings include Federal National Mortgage Association (FNMA) bonds, Federal Home Loan Mortgage Corporation, Government National Mortgage Association (GNMA) with different coupon rates and maturity dates.


5. iShares iBoxx $ High Yield Corporate Bond

iShares iBoxx $ High Yield Corporate Bond ETF investment seeks to mimic the iBoxx $ Liquid High Yield corporate bonds index performance, before fees or expenses. The fund invests at least 90% of assets in securities that comprise this iBoxx index. It may also invest minority of its asset (<20%) in certain futures, options and swap contracts, cash, and in bonds not included within the index. The fund expense ratio is 0.50% per year. The fund has a total net asset of 8.15 billion. The average credit rating of this fund is B-, non-investment grade bonds. The effective duration of this high yield bond ETF is 4.03 years. It currently has a yield of 7.64% per year. There are 422 bonds in its holding. You will need a brokerage account such as E*Trade or eOption brokerage account to buy this ETF online.

As of February 14, 2011, the top 5 sectors diversification of this fund include Financial Services debt, Oil & Gas Products debt, Travel & Leisure bond, Mobile Telecommunication bond, and Electricity companies bond. The Top 10 corporate bond holdings include CIT Group Inc, BlackRock Cash funds, Lyondell Chemical Co, IntelSat Bermuda Ltd, First Data Corp, HCA Inc, CHS / CMNTY Health S, NRG Energy Inc, and American Gen Fin Med.


6. iShares Barclays 1-3 Year Treasury Bond

The iShares Barclays 1-3 Year Treasury Bond ETF seeks to replicate the short-term sector of the United States Treasury market index performance. It uses the Barclays Capital 1-3 Year U.S. Treasury index as its underlying index. This iShares fund invests >90% of assets in the bonds of the underlying index and > 95% of assets in U.S. government debt. The expense ratio is only 0.15% per year. This iShares Barclays 1-3 Year Treasury Bond ETF is passively managed fund or index ETF. The average credit rating of this fund is AAA, the highest investment grade bonds. The effective duration of this iShares bond ETF is 1.83 years. It also has a yield of 1.01% per year. It also has a total net asset of 7.99 billion.

As of February 2011, the top debt sectors include treasuries (99.30). The Top 10 daily holdings in this iShares ETF include US Treasuries at different maturity and yields. It is also rated with 3 stars on Morningstar rating. The fund has returned 1.64% over the past year and 2.56% over the past 3 years.


7. iShares Barclays 1-3 Year Credit Bond

The iShares Barclays 1-3 Year Credit Bond ETF objective is to seek investment results that match the price and yield performance of the Barclays Capital 1-3 Year U.S. Credit index. The iShares Barclays 1-3 Year Credit Bond ETF fund invests at majority of its assets (>90%) in the securities of the underlying index. It may invest the remainder of the assets in other securities, futures, options and swap contracts, cash, and money market. This fund also has a yield of 2.41% per year. The average credit rating of this fund is A-, investment grade bonds. The effective duration of this bond ETF is 1.85 years. As of February 2011, the fund also has a total net asset of 7.52 billion. The expense ratio is only 0.20% per year. It also has 4 stars rating from Morningstar. Please check my brokerage account review for details about how to buy ETF online cheaply.

As of February 2011, the top 5 debt sectors include Industrial bonds (34.90%), Financial Institutions (28.59%), Supranational, Agencies, and utility bonds (5.33%). The Top 10 bond holdings in this iShares ETF include Kreditanstalt Fur Wi, Citigroup Inc, European Investment Bank, International Bank for Reconstruction and Development, General Electric Co, Pfizer Inc, BlackRock Cash Funds, and Credit Suisse First Boston.

 

SDPR Barclays Capital High Yield Bond Holding
SDPR Barclays Capital High Yield Bond Holding

8. SPDR Barclays Capital High Yield Bond

The SPDR Barclays Capital High Yield Bond fund seeks to replicate the price and yield performance of the Barclays Capital High Yield Very Liquid index, before fees and expenses. This SPDR fund invests > 80% of total assets in securities that comprise its benchmark index. The fund expense ratio is 0.40% per year and is slightly lower than the above iShares iBoxx $ High Yield Corporate Bond ETF. The fund has a total net asset of 7.21 billion. The average credit rating of this fund is B, non-investment grade bonds. The modified adjusted duration of this high yield bond ETF is 4.52 years. It currently has a yield of 8.10% per year. There are 215 bonds in its assets. The fund has returned 16.07% over the past year and 8.05% over the past 3 years.

As of February 15, 2011, the top 4 sectors diversification of this fund includes Industrial corporate bond, financial corporate bond, utility company bond and cash. The Top 10 corporate bond holdings include CIT Group Inc, Lyondell Chemical Co, First Data Corp, Caesar Entertainment, IntelSat Luxembourg SA, Energy Future / EFIH Financial, Residential Capital LLC, Clear Channel Worldwide, Wind Acquisition Financial SA, and CCH II LLC.


9. Vanguard Short-Term Bond ETF

The Vanguard Short-Term Bond ETF seeks to track the performance of a market weighted bond index with a short-term dollar-weighted average maturity by investing >80% of its asset in the underlying index. The fund is passively managed (i.e. indexing investment approach is used). This Vanguard ETF is designed to track the performance of the Barclays Capital U.S. 1-5 Year Government/ Credit Float Adjusted Index. The fund has a total net asset of 5.90 billion. The average credit rating of this fund is AA, investment grade bonds. The average duration of this short term bond ETF is 2.60 years. It currently has a yield of 2.22% per year. There are 1301 bonds in its assets. It current has 0.12% of expense ratio. This ETF is available through Vanguard Brokerage Services or VBS.

As of February 2011, the top debt sectors include Treasuries (71.6%), Industrial corporate bond, financial corporate debt, foreign debts, and utilities debt. The top 10 debt holdings in this Vanguard ETF include US Treasuries at different maturity and yields. It has also a 4 stars rating from Morningstar. The fund has returned 3.24% over the past year and 4.06% over the past 3 years.


10. iShares Barclays Short Treasury Bond Fund

The iShares Barclays Short Treasury Bond fund try to replicate the price and yield performance of the Barclays Capital U.S. Short Treasury Bond index. The fund invests >90% of assets in the bonds of the underlying index and >95% of assets in U.S. government bonds. The expense ratio is only 0.15% per year. This iShares Barclays Short Treasury Bond ETF is a passively managed fund. The average credit rating of this fund is AAA, the highest investment grade bonds. The effective duration of this bond ETF is 0.40 year. It also has a yield of 0.09% per year. It also has a total net asset of 4.13 billion.

As of February 2011, the top debt sectors include treasuries (96.70%). The Top 10 daily holdings in this iShares ETF include US Treasuries at different maturity and yields. It is also rated with 3 stars on Morningstar rating. The fund has returned 0.12% over the past year and 0.82% over the past 3 years.


Disclosure: I have no affiliation with any of these funds. I also have no position in these funds. Please do your own research for additional details. Please trade and invest responsibly. Past Performance is No Guarantee of Future Results.

Top 20 Best Bond ETF Performance

(click column header to sort results)
No  
Fund Description  
3 Month  
YTD  
1 Yr  
3 Yrs  
5 Yrs  
Since Inception  
1
iShares Barclays TIPS Bond
-3.05%
0.20%
4.64%
3.54%
5.22%
5.28%
2
iShares iBoxx $ Invest Grade Corp Bond
-1.76%
0.39%
8.39%
6.45%
5.76%
5.88%
3
iShares Barclays Aggregate Bond
-1.54%
0.08%
4.89%
5.17%
5.62%
4.86%
4
Vanguard Total Bond Market ETF
-1.59%
0.09%
4.96%
5.32%
N/A
6.08%
5
iShares iBoxx $ High Yield Corporate Bd
2.84%
2.39%
14.35%
7.88%
N/A
5.76%
6
iShares Barclays 1-3 Year Treasury Bond
-0.24%
0.14%
1.64%
2.56%
4.07%
3.14%
7
iShares Barclays 1-3 Year Credit Bond
0.01%
0.36%
3.19%
4.16%
N/A
4.88%
8
SPDR Barclays Capital High Yield Bond
2.89%
2.29%
16.07%
8.05%
N/A
6.72%
9
Vanguard Short-Term Bond ETF
-0.70%
0.36%
3.24%
4.06%
N/A
5.21%
10
iShares Barclays Short Treasury Bond
0.04%
0.02%
0.12%
0.82%
N/A
2.00%
11
iShares Barclays Intermediate Credit Bd
-1.34%
0.60%
6.54%
6.01%
N/A
6.14%
12
iShares Barclays 7-10 Year Treasury
-4.21%
0.03%
6.95%
5.34%
6.57%
5.61%
13
iShares Barclays 20+ Year Treas Bond
-7.82%
-3.09%
3.23%
2.90%
4.57%
5.82%
14
iShares Barclays MBS Bond
-0.76%
0.03%
3.95%
5.44%
N/A
5.85%
15
iShares JPMorgan USD Emerg Markets Bond
-4.81%
-0.74%
10.52%
7.20%
N/A
7.37%
16
Vanguard Intermediate-Term Bond ETF
-3.04%
0.34%
7.68%
6.37%
N/A
7.27%
17
iShares S&P National AMT-Free Muni Bd
-5.26%
-0.95%
0.09%
2.76%
N/A
3.31%
18
SPDR Barclays Capital Intl Treasury Bond
-3.03%
0.17%
5.23%
3.97%
N/A
5.70%
19
iShares Barclays 3-7 Year Treasury Bond
-2.37%
0.51%
5.23%
4.92%
N/A
6.73%
20
SPDR Nuveen Barclays Capital S/T Muni Bd
-0.99%
-0.07%
1.04%
3.15%
N/A
4.00%
updated 2/14/2011

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