3 Top-Performing Intermediate Government Bond Funds

Intermediate-term government bond funds can provide bond exposure with virtually zero credit risk (the risk of default). These funds are the best-in-class options, according to Morningstar analysts. To screen for the top-performing funds in this category, we looked for those with the best returns over the last one-, three-, and five-year periods. All names that passed the screen are index funds.

Intermediate Government Bond Funds Performance

• Schwab Intermediate-Term US Treasury ETF SCHR
• State Street SPDR Portfolio Intermediate Term Treasury ETF SPTI
• Vanguard Intermediate-Term Treasury Index Fund VGIT

Over the last 12 months, the intermediate government bond category returned 4.74%. On an annualized rate, these funds have returned 3.40% over the last three years and lost 0.66% over the last five. That compares with the Morningstar US Core Bond Index, which has returned 4.77% over the last 12 months, gained 3.98% per year over the last three years, and lost 0.40% per year over the last five years.

What Are Intermediate Government Bond Funds?

Intermediate government portfolios have at least 90% of their bond holdings in bonds backed by the US government or government-linked agencies. This backing minimizes the credit risk of these portfolios, as the US government is unlikely to default on its debt.

These portfolios have durations typically between 3.5 and 6.0 years. Consequently, the group’s performance—and its volatility—tends to fall between that of the short government and long government bond categories. Morningstar calculates monthly breakpoints using the effective duration of the Morningstar Core Bond Index to determine duration assignment. Intermediate is defined as 75%-125% of the three-year average effective duration of the MCBI.

We looked at returns from the past one, three, and five years using data available in Morningstar Direct. We screened for open-ended and exchange-traded funds in the top 33% of the category using their lowest-cost primary share classes for those periods. We also filtered for funds with a Morningstar Medalist Rating of Bronze, Silver, or Gold. We excluded funds with assets under $100 million and analyst coverage that was not 100%. This left three investments.

Schwab Intermediate-Term US Treasury ETF

• Morningstar Medalist Rating: Silver
• Morningstar Rating: ★★★★

This $12 billion fund has gained 5.49% over the past year, while the average fund in its category is up 4.74%. The Schwab fund, launched in August 2010, has climbed 3.78% over the past three years and lost 0.28% over the past five.

The Bloomberg US Treasury 3-10 Year Index includes Treasury bonds whose remaining maturities range from three to 10 years. Qualifying bonds must have at least $300 million in outstanding face value. The index is market-value-weighted and rebalances each month. Market value weighting emphasizes the largest and most liquid Treasuries while controlling turnover and the associated transaction costs. This results in a conservative portfolio that limits return potential but also caps risk.

Investors enjoy virtually zero credit risk, since the fund holds Treasuries exclusively. Many peers reach into the securitized bucket to generate extra return, which can hurt competitors when credit spreads widen but help when they narrow. The typical peer’s stake in securitized assets had risen to almost 45% at the end of June 2025.

The portfolio experiences less turnover on average than the category norm. The typical peer’s annual portfolio turnover routinely runs well above 100% compared with this fund’s 35% average annual turnover since 2015. This means the category’s complexion changes more frequently than this fund and can lead to disparate risk and performance patterns. For example, the fund has historically taken on more interest rate risk than the category norm, but this changed in early 2022 when category peers increased their allocation to longer-duration bonds. While this portfolio remains relatively consistent in its exposures, category-relative returns are determined by the risks peers are willing to take.

—Zachary Evens, analyst

State Street SPDR Portfolio Intermediate Term Treasury ETF

• Morningstar Medalist Rating: Silver
• Morningstar Rating: ★★★★

This $9.6 billion fund has climbed 5.53% over the past year, outperforming the average fund in its category, which rose 4.74%. The fund, launched in May 2007, has climbed 3.80% over the past three years and lost 0.28% over the past five. The strategy tracks the Bloomberg US Treasury 3-10 Year Index.

—Zachary Evens

Vanguard Intermediate-Term Treasury Index Fund

• Morningstar Medalist Rating: Silver
• Morningstar Rating: ★★★★

Over the past year, the Vanguard fund rose 5.51%, while the average fund in its category rose 4.74%. The fund, launched in November 2009, has climbed 3.80% over the past three years and lost 0.27% over the past five years.

Vanguard Intermediate-Term Treasury Index provides a market-value-weighted portfolio of intermediate-term US Treasury bonds. Its cost-efficient approach and razor-thin expense ratio make this a compelling choice. The strategy tracks the Bloomberg US Treasury 3-10 Year Index.

The Treasury market quickly reflects the market’s inflation and interest rate expectations. It is difficult for active managers to gain a durable edge and recoup their fees in this market, without also taking greater risk than this portfolio.

While credit risk is largely absent, interest rate risk is ever-present. The portfolio’s average effective duration stood at 4.93 years in June 2025 and usually hovers around 5.00 years. This makes the fund more sensitive to interest rate movements than those tracking the shorter end of the yield curve. Indeed, this fund was caught on its back foot as interest rates rose quickly in 2022. It lost 10.7% of its value for the full year. Many peers took on more interest rate risk, so the fund still fared more than a percentage point better than the category norm.

—Zachary Evens