Vanguard Total Bond Market Index Fund ETF Shares BND

Vanguard Total Bond Market’s expansive portfolio and razor-thin fee preserve its advantage in the intermediate core bond Morningstar Category.

The fund tracks the Bloomberg US Aggregate Float Adjusted Index, which captures investment-grade, fixed-rate, taxable bonds denominated in US dollars. The index has different minimum size requirements for each type of bond, which helps the index remain investable given the large asset base following it. While it captures a broad swath of the bond market, the index excludes riskier types of bonds, such as eurodollar bonds, non-ERISA-eligible commercial mortgage-backed securities, and bonds with equity features. It weights selected holdings by market value after reducing the amount outstanding for bonds held by the Federal Reserve to adjust for float.

This weighting scheme tilts the fund toward the largest issuers, resulting in an overweight position to US Treasuries compared with category peers. The fund tends to park around 40%-50% of its assets in these instruments versus 30% for the category average. A heavy dose of Treasuries translates into a relatively high-quality portfolio. Over 70% of the portfolio carries a credit rating of AAA or AA, or around 10 percentage points higher than the category average as of February 2026.

This conservative risk profile can help performance during credit shocks. For instance, the fund outpaced its category average during both the 2008 global financial crisis and the March 2020 coronavirus drawdown. However, this can also hurt when credit risk pays off. This occurred most recently when credit spreads compressed after the volatile market in early April 2025. Its actively managed peers can lean into riskier assets to find pockets of opportunities.

Adjusting for float steers the index away from agency MBS compared with its category peers and the Bloomberg US Aggregate Bond Index—its non-float-adjusted counterpart. Still, this sector makes up around 20% of the portfolio, and it’s the fund’s third-largest sector allocation after Treasuries and corporate bonds.

The fund’s average duration has come back in line with the category average, standing under 6 years as of February 2026. Recently, low interest rates incentivized issuers to borrow more for longer terms and thereby lengthened the market’s average duration. The fund’s portfolio reflected this trend even as some peers kept a tighter leash on interest rate risk. While issuance activities can tilt its duration profile, its muted credit risk is still the main driver of category-relative performance. The fund’s broad scope and low fee should also provide a long-term performance edge.

This fund provides a well-constructed portfolio of investment-grade US bonds, warranting an Above Average Process rating.

The fund tracks the Bloomberg US Aggregate Float Adjusted Index, which captures investment-grade, fixed-rate, taxable US bonds. The index implements minimum size thresholds for each security type, which ensures there’s enough liquidity for the sizable asset base tracking it. The index also excludes riskier types of securities such as bonds with equity features, non-ERISA-eligible CMBS, and eurodollar bonds. It weights selected holdings by market value, after reducing the value of debt held by the Federal Reserve to adjust for float. That caused the fund to reduce its allocation to agency MBS after the Fed ramped up purchases of agency MBS following the global financial crisis.

This weighting scheme tilts the portfolio heavily toward larger issuers, most notably the US Treasury. The fund’s Treasury stake climbed to 50% from 40% in the last decade as issuance picked up, particularly since the pandemic. In comparison, the average category peer tends to park only 30% of their assets here. Overweighting Treasuries comes at the expense of allocations to agency MBS and asset-backed securities. Active managers in this category tend to load up on ABS to look for extra yield.

Stocking up on Treasuries also mutes credit risk. The fund tends to park around 70% of its assets in AAA and AA rated bonds compared with only 60% for the average category peer. Peers load up on BBB rated bonds instead, and some reach to junk bonds for additional yield. The fund’s limited credit risk should cushion downturns during credit shocks, but it will miss out when credit spreads tighten.

The fund’s average duration stood at 5.7 years as of February 2026, which was similar to that of the category average. Issuance activities can influence the interest rate risk this fund incurs. Its average duration was slightly longer than peers in recent years as issuers took advantage of historically low interest rates to borrow for longer terms at lower rates.

Vanguard's fixed-income index team has a lot of advantages. It taps into a global network of portfolio managers, sector specialists, and trading desks to deliver accurate index tracking in the markets that it touches. It earns an Above Average People Pillar rating.

Experienced managers make up Vanguard’s team. They’re supported by a deep bench of talent that allows them to focus on portfolio construction and tracking performance. Each fund has a lead manager who collaborates with traders and sector specialists to ensure tracking performance stays within well-defined guardrails.

Specialization extends in many directions. ETF specialists help manage creation and redemption baskets, while a dedicated data team handles index changes and corporate actions. International specialists help manage portfolios in local markets outside of the US to keep costs down and tracking tight.

Many bonds aren’t available for trading, so index funds cannot hold every bond in an index. Despite that drawback, Vanguard’s team has continued to invest in new ways to improve the precision of its tracking efforts while keeping a lid on trading costs. It recently expanded its quantitative unit, which developed an optimization tool that incorporates traders' insights and liquidity data to improve tracking performance.

Vanguard maintains its High Parent Pillar rating as it continues to grow under new leadership.

CEO Salim Ramji has had a busy first year captaining Vanguard’s crew, and the ship remains pointed in the right direction. The firm made its largest round of fee cuts in early 2025, which came at an estimated cost of USD 350 million. It established a separate division dedicated to its advice and wealth management efforts, a sign that it wants to seriously compete within those lines of business. Asset growth has continued to be a huge success. Only BlackRock’s inflows rival the money Vanguard is taking in. Likewise, the number of clients it serves has more than doubled since 2015.

Despite that success, an ever-growing number of clients has presented a challenge: Vanguard can’t grow its services fast enough to keep up with demand. In some instances, it has had to curb certain services and capabilities or raise fees on others to cope, causing some loyal clients to criticize what they perceive as deteriorating services.

Vanguard has ambitions to bring its disruptive legacy to the bond market. It created roughly a dozen low-cost bond exchange-traded funds for US investors and several others abroad over the 12 months through June 2025. All have low fees in their respective categories, and the actively managed strategies align with Vanguard’s philosophy. They are relatively easy to understand and are conservatively managed.

Vanguard has another opportunity to prove that clients are still its priority. On the surface, its endeavor into the high-fee deal-making world of private assets alongside Wellington and Blackstone looks like a cultural mismatch. So far, the collaboration hasn’t produced anything that’s concerning.

The fund’s exchange-traded fund share class outpaced the category average by 25 basis points annualized from its 2007 inception through February 2026. Much of the fund’s outperformance comes from a conservative risk profile and Treasury heavy portfolio. This provided better protection during credit shocks as investors fled to safe-haven assets like Treasuries. The fund outpaced the category average by 6.84 and 2.13 percentage points during the 2008 financial crisis and the coronavirus pandemic shock in March 2020, respectively. More recently, the fund beat the average peer during the volatile first quarter of 2025, though it failed to keep up during the subsequent credit rally.

Risk-on environments like these will continue to dent the fund’s excess returns. For instance, it trailed the category average by 38 basis points in 2024 as tight credit spreads slightly dented excess returns.

The fund does not currently take any duration bets compared with the category norm, but its average duration used to be slightly longer. This detracted from category-relative returns when yields on long-term bonds rose. Nonetheless, the fund’s main return driver is still its conservative credit risk profile. Tempering credit risk helped it outperform the category average by 20 basis points during the market meltdown in 2022 as safe assets fared relatively well that year.

Overall, the fund can be just as volatile as the category average, but its broad scope and low fee should provide a long-term performance edge.

Vanguard Total Bond Market ETF's Prospectus Adjusted Expense Ratio is 0.03% per year. It places it in the cheapest quintile of the Morningstar US Fund Intermediate Core Bond Category, where the median fee is 0.46% per year. This cost positioning translates into a Medalist Rating Price Score of 2.3, which reflects its relative price positioning within the category. The Price Score ranges from -2.50 (most expensive) to +2.50 (cheapest), with higher scores indicating better cost competitiveness.