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A Broader Bond Market for a Good Price

Silver-rated iShares Core Total is a good, low-cost vehicle for exposure to the U.S. dollar bond market spanning the entire credit spectrum.


Phillip Yoo: IShares Core Total USD Bond Market provides market-cap-weighted exposure to the broad U.S. dollar-denominated bond market, spanning the entire credit spectrum. The fund efficiently tracks the Bloomberg Barclays U.S. Universal Index, and it is currently the only fund replicating the index. Also, its fee is one of the lowest in the intermediate-term bond Morningstar Category.

It uses a sampling strategy to track its index, which measures the total U.S. dollar-denominated, fixed-rate, taxable-bond market. It weights these securities by market capitalization, tilting the portfolio toward investment-grade bonds. The investment-grade portion takes up more than 90% of the fund, in-line with its category peers. Also, low-yielding, yet secure U.S. Treasuries and government-sponsored enterprise mortgage-backed-securities make up roughly half of the portfolio. The category average is approximately 40%. As a result, this fund delivers a relatively lower yield despite its higher yielding holdings rated below investment grade.

Phillip Yoo does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.