Best Bond ETFs

Q: How much of my portfolio should be in bonds?

The classic rule is to hold a bond percentage close to your age (30 years old = 30% bonds, 60 years old = 60% bonds). It's a simplification, but the principle is sound: the shorter your investment horizon, the higher the bond allocation should be to reduce volatility. A young investor with a 20+ year horizon can get by with 10-20% bonds, while a retiree would aim for 50-70%.

Q: Do bonds lose money when interest rates rise?

Yes, the price of existing bonds falls when rates rise — this is interest rate risk. In 2022, bond ETFs lost 10-20% depending on duration, which surprised many investors accustomed to seeing bonds as "risk-free". However, if you hold the ETF long enough, the higher yield from new bonds added to the fund gradually offsets this capital loss. The shorter the duration, the faster the recovery.

Q: Should I choose a euro bond ETF or a euro-hedged ETF?

If you're investing in euro-denominated bonds (European sovereign, euro corporate), there's no issue — no currency risk. For US bonds (Treasuries, USD corporate), a euro-hedged ETF eliminates currency risk at a hedging cost (generally the rate differential between the two zones). For bond investments, hedging is recommended because bonds are supposed to stabilise the portfolio — adding currency risk works against that objective.

Q: What duration should I choose for a bond ETF?

In a rising rate environment, favour short-duration bonds (1–3 years) that are less sensitive. When rate cuts are expected, long-duration bonds (10+ years) offer better capital gain potential. An aggregate covers all maturities.

Q: Fixed-maturity bond ETFs: what’s the benefit?

Fixed-maturity ETFs (iShares iBonds, BulletShares) behave like individual bonds with a set maturity date. At maturity, the capital is returned. They combine the diversification of an ETF with the predictability of a bond.

Q: Should young investors hold bonds in their portfolio?

Even with a long-term horizon, 10–20% bonds reduce portfolio volatility and provide capital to reinvest during equity corrections. The ‘100 minus age = % equities’ rule is a starting point, to be adapted to your risk tolerance.

Intermediate

Compare government and corporate bond ETFs for fixed income exposure. Lower volatility and steady income for balanced portfolios.

Updated 2025-05

Written by Mottalib RadifMBA INSEAD

Bonds are the natural complement to equities in a diversified portfolio. They provide a regular income stream (coupons) and significantly lower volatility than equity markets, acting as a shock absorber during turbulent periods. A bond ETF gives you access to hundreds or even thousands of bonds in a single transaction.

The bond market is vast and diverse: government bonds (sovereign), corporate bonds (investment grade or high yield), inflation-linked bonds, floating rate notes, and emerging market debt. Each segment has its own risk/return profile. Government bonds from developed countries (Germany, France, US) are the safest but offer the lowest yields, while high yield provides higher coupons with increased default risk.

After years of low or even negative rates, the rate-hiking cycle that began in 2022 has restored the appeal of bonds. Yields are now at their highest levels in over 15 years, offering a positive real return for the first time in a long while. This comparison analyses the leading bond ETFs available in Europe to help you build the defensive portion of your portfolio.

Avg. TER

0.16%

Avg. 1Y Perf

-2.6%

Total AUM

1794.9B

ETFs available

BND — Bloomberg U.S. Aggregate Float Adjusted

Vanguard Total Bond Market ETF

View details→

-16.8%

Simulated from available data points. Past returns do not guarantee future results.

How to choose a bond ETF

Duration is the most important criterion. It measures the sensitivity of the bond's price to interest rate changes. An ETF with short duration (1-3 years) is less sensitive to rates and offers maximum stability. An ETF with long duration (10-20 years) is highly volatile based on rate movements but offers higher yield potential. For investors looking to limit interest rate risk, a short-term or floating rate bond ETF is preferable.

The type of issuer is the second criterion. Eurozone government bonds (German Bunds, French OATs) offer maximum safety with moderate yield. Investment grade corporate bonds (BBB-rated or higher) add a yield premium (spread) of 0.5-1.5% over sovereign bonds. High yield bonds (rated below BBB) offer attractive yields but with meaningful default risk.

Bond ETF fees are generally very low — between 0.05% and 0.20% for the most popular products. Check whether the ETF is accumulating or distributing: during the savings phase, accumulating is more tax-efficient. For euro-based investors, prefer EUR-denominated or currency-hedged ETFs when investing in US bonds.

Full Comparison

#	Name	TER	AUM	Replication	Distribution	1Y	3Y	5Y
1	BNDVanguard Bloomberg U.S. Aggregate Float Adjusted	0.03%	397.9B	physical	distributing	-1.6%	+0.3%	-3.5%
2	AGGiShares Bloomberg U.S. Aggregate Bond	0.03%	138.8B	physical	distributing	-1.6%	+0.2%	-3.4%
3	BNDXVanguard Bloomberg Global Aggregate ex-USD Float Adjusted RIC Capped USD Hedged	0.07%	123.3B	physical	distributing	-3.2%	-0.5%	-3.8%
4	VUSDVanguard Bloomberg US Government Float Adjusted Bond	0.07%	85.3B	physical	distributing	+18.1%	+18.5%	+11.2%
5	VTIPVanguard Bloomberg US Treasury Inflation-Protected Securities 0-5 Year	0.04%	71.1B	physical	distributing	-1.2%	+1.6%	-1.1%
6	BSVVanguard Bloomberg US 1-5 Year Government/Credit Float Adjusted	0.04%	69.8B	physical	distributing	-1.2%	+0.9%	-1.1%
7	VCITVanguard Bloomberg U.S. 5-10 Year Corporate Bond	0.04%	69.4B	physical	distributing	-1.9%	+1.3%	-3.2%
8	BIVVanguard Bloomberg US 5-10 Year Government/Credit Float Adjusted	0.04%	52.5B	physical	distributing	-2.2%	+0.5%	-3.6%
9	VCSHVanguard Bloomberg U.S. 1-5 Year Corporate Bond	0.04%	51.8B	physical	distributing	-1.0%	+1.3%	-1.0%
10	VGITVanguard Bloomberg U.S. Treasury 3-10 Year Bond	0.04%	50.4B	physical	distributing	-2.1%	+0.0%	-3.1%
11	IEFiShares ICE U.S. Treasury 7-10 Year Bond	0.15%	47.1B	physical	distributing	-2.5%	-0.7%	-4.5%
12	GOVTiShares ICE U.S. Treasury Core Bond	0.05%	43.7B	physical	distributing	-1.9%	-0.2%	-3.5%
13	TLTiShares ICE U.S. Treasury 20+ Year Bond	0.15%	41.1B	physical	distributing	-5.8%	-5.2%	-11.1%
14	MBBiShares Bloomberg U.S. MBS	0.04%	39.6B	physical	distributing	-0.7%	+0.4%	-3.0%
15	VGSHVanguard Bloomberg U.S. Treasury 1-3 Year Bond	0.04%	33.8B	physical	distributing	-0.8%	+0.2%	-1.1%
16	LQDiShares Markit iBoxx USD Liquid Investment Grade	0.14%	33.1B	physical	distributing	-2.9%	+0.1%	-4.6%
17	SHYiShares ICE U.S. Treasury 1-3 Year Bond	0.15%	25.4B	physical	distributing	-0.8%	+0.4%	-1.0%
18	IGSBiShares ICE BofA 1-5 Year US Corporate	0.04%	22.3B	physical	distributing	-1.0%	+1.3%	-1.0%
19	TIPSiShares Bloomberg U.S. Treasury Inflation Protected Securities	0.19%	20.0B	physical	distributing	-99.5%	-86.6%	-58.4%
20	IGIBiShares ICE BofA 5-10 Year US Corporate	0.06%	18.5B	physical	distributing	-1.9%	+1.4%	-2.9%
21	HYGiShares Markit iBoxx USD Liquid High Yield	0.49%	17.6B	physical	distributing	-0.9%	+2.1%	-1.9%
22	USIGiShares ICE BofA US Corporate	0.04%	17.6B	physical	distributing	-2.1%	+0.6%	-3.7%
23	VMBSVanguard Bloomberg US MBS Float Adjusted	0.04%	17.3B	physical	distributing	-0.4%	+0.6%	-3.0%
24	SCHPSchwab Bloomberg US Treasury Inflation-Protected Securities	0.03%	16.5B	physical	distributing	-2.3%	+0.2%	-3.7%
25	IEACiShares Bloomberg EUR Corporate Bond	0.20%	16.0B	physical	distributing	-2.1%	+0.9%	-2.8%
26	VGLTVanguard Bloomberg US Long Treasury Bond	0.04%	15.2B	physical	distributing	-5.2%	-4.2%	-10.1%
27	EMBiShares J.P. Morgan EMBI Global Core	0.39%	14.6B	physical	distributing	+1.4%	+3.1%	-3.3%
28	SCHRSchwab Bloomberg US Treasury 3-10 Year	0.03%	13.4B	physical	distributing	-2.1%	-0.1%	-3.1%
29	PFFiShares ICE Exchange-Listed Preferred & Hybrid Securities	0.46%	13.1B	physical	distributing	-2.2%	-0.2%	-5.0%
30	SCHOSchwab Bloomberg US Treasury 1-3 Year	0.03%	13.0B	physical	distributing	-0.9%	+0.1%	-1.2%
31	SCHZSchwab Bloomberg US Aggregate Bond	0.03%	10.6B	physical	distributing	-1.7%	+0.0%	-3.6%
32	SPTLSPDR Bloomberg Long U.S. Treasury	0.03%	10.5B	physical	distributing	-4.9%	-3.9%	-9.9%
33	VCLTVanguard Bloomberg US 10+ Year Corporate Bond	0.04%	10.1B	physical	distributing	-4.8%	-1.6%	-7.7%
34	AGGHiShares Bloomberg Global Aggregate Bond EUR Hedged	0.10%	10.0B	physical	accumulating	—	—	—
35	FLOTiShares Bloomberg US Floating Rate Note < 5 Years	0.15%	10.0B	physical	distributing	+0.2%	+0.3%	+0.1%
36	SPABSPDR Bloomberg US Aggregate Bond	0.03%	9.6B	physical	distributing	-1.6%	+0.1%	-3.6%
37	BLVVanguard Bloomberg US Long Government/Credit Float Adjusted	0.04%	8.7B	physical	distributing	-4.6%	-2.6%	-8.8%
38	IHYGiShares Markit iBoxx EUR Liquid High Yield	0.50%	8.5B	physical	distributing	-3.8%	-0.1%	-2.6%
39	VEUDVanguard Bloomberg EUR Non-Government Float Adjusted Bond	0.09%	7.4B	physical	accumulating	+17.9%	+14.0%	+6.3%
40	JNKSPDR Bloomberg High Yield Very Liquid	0.40%	7.3B	physical	distributing	-1.1%	+1.5%	-2.6%
41	BKLNInvesco Morningstar LSTA US Leveraged Loan 100	0.65%	7.1B	physical	distributing	-2.7%	-0.9%	-1.5%
42	IEMBiShares J.P. Morgan EMBI Global Core	0.45%	6.8B	physical	distributing	+0.7%	+2.4%	-3.9%
43	EMBEiShares J.P. Morgan GBI-EM Global Diversified	0.50%	5.4B	physical	distributing	+0.8%	-1.0%	-2.8%
44	IBTMiShares ICE US Treasury 7-10 Year Bond	0.07%	5.2B	physical	distributing	-2.9%	-2.6%	-4.0%
45	IBTSiShares ICE U.S. Treasury 1-3 Year Bond	0.07%	5.0B	physical	distributing	-1.2%	-1.6%	-0.3%
46	NEARiShares Active - Short Maturity	0.25%	4.8B	physical	distributing	-0.9%	+0.6%	+0.2%
47	ERNEiShares Markit iBoxx EUR Liquid Investment Grade Ultrashort	0.09%	4.5B	physical	accumulating	-0.2%	+0.1%	+0.2%
48	EUIGiShares iBoxx EUR Liquid Corporates Large Cap	0.20%	4.5B	physical	distributing	—	—	—
49	IS04iShares Bloomberg Euro Government Bond 7-10 Year	0.15%	4.5B	physical	distributing	—	—	—
50	IBGSiShares Bloomberg Euro Govt 1-3yr	0.20%	4.0B	physical	distributing	-2.4%	+0.4%	-0.2%
51	IUAAiShares Bloomberg US Aggregate Bond	0.07%	4.0B	physical	accumulating	+2.0%	+3.8%	-0.5%
52	VAGFVanguard Bloomberg Global Aggregate Float Adjusted Composite EUR Hedged	0.10%	3.8B	physical	accumulating	—	—	—
53	LQDEiShares Markit iBoxx USD Liquid Investment Grade	0.20%	3.3B	physical	distributing	-3.4%	-0.4%	-5.1%
54	VECPVanguard Bloomberg EUR Non-Government Float Adjusted Bond	0.09%	3.2B	physical	distributing	-3.4%	+0.5%	-2.5%
55	ANGLVanEck ICE US Fallen Angel High Yield 10% Constrained	0.35%	3.1B	physical	distributing	-0.6%	+1.6%	-2.5%
56	IDTLiShares ICE US Treasury 20+ Year Bond	0.07%	3.1B	physical	distributing	-5.5%	-5.0%	-11.2%
57	XBLCXtrackers iBoxx EUR Corporates Yield Plus	0.12%	3.0B	physical	accumulating	—	—	—
58	VGOVVanguard Bloomberg Sterling Gilt Float Adjusted Bond	0.07%	3.0B	physical	distributing	-2.7%	-2.0%	-9.1%
59	IGILiShares FTSE G7 Government Bond	0.20%	2.9B	physical	distributing	+1.6%	+2.8%	-2.9%
60	XBLDXtrackers iBoxx EUR Corporates 1-3	0.15%	2.5B	physical	accumulating	-1.6%	+1.6%	-2.2%
61	XGLEXtrackers iBoxx EUR Sovereigns Eurozone	0.07%	2.3B	physical	accumulating	+0.0%	+2.4%	-2.8%
62	TMFDirexion ICE U.S. Treasury 20+ Year Bond 3x Leveraged	1.01%	2.3B	synthetic	distributing	-19.9%	-21.9%	-36.0%
63	VETYVanguard Bloomberg EUR Eurozone Government Float Adjusted Bond	0.07%	2.2B	physical	distributing	-4.0%	-0.6%	-4.4%
64	SDHYiShares Markit iBoxx USD Liquid High Yield 0-5 Capped	0.45%	2.2B	physical	distributing	-1.5%	+0.7%	-1.1%
65	IEGAiShares Bloomberg EUR Treasury	0.07%	2.1B	physical	distributing	-2.9%	+0.1%	-4.4%
66	FLOAiShares Bloomberg Barclays Euro Floating Rate	0.10%	2.0B	physical	distributing	+4.5%	+5.5%	+4.4%
67	XGIUXtrackers iBoxx USD Liquid Investment Grade	0.12%	2.0B	physical	distributing	+2.6%	+1.2%	-2.5%
68	HYLDiShares Markit iBoxx Global Developed Markets Liquid High Yield Capped	0.50%	2.0B	physical	distributing	-3.7%	+1.7%	-2.2%
69	ERNSiShares Bloomberg MSCI EUR Corporate 0-3 Sustainable SRI	0.12%	2.0B	physical	distributing	-0.3%	+0.0%	+0.1%
70	IBCIiShares Bloomberg Euro Government Inflation-Linked Bond	0.09%	1.9B	physical	accumulating	+1.6%	+1.6%	+0.4%
71	VEMTVanguard Bloomberg EM USD Government 10% Country Capped Bond	0.25%	1.5B	physical	distributing	-0.5%	-0.0%	-2.9%
72	XGSHXtrackers FTSE World Government Bond EUR Hedged	0.25%	1.5B	physical	accumulating	—	—	—
73	STHYSPDR Bloomberg US Corporate 0-3 Year	0.15%	1.2B	physical	distributing	-2.0%	+0.7%	-1.4%
74	SUAGiShares Bloomberg MSCI USD Corporate Sustainable SRI	0.15%	1.2B	physical	distributing	-1.5%	-1.5%	-2.9%
75	SXRJiShares Bloomberg EUR Treasury 15-30yr	0.20%	922M	physical	distributing	+13.4%	+12.8%	+6.1%
76	X25EXtrackers iBoxx EUR Sovereigns Eurozone 25+	0.15%	800M	physical	accumulating	—	—	—
77	ESGBiShares Bloomberg MSCI EUR Corporate Liquid Bond Screened	0.12%	572M	physical	distributing	-14.5%	+18.2%	+9.8%
78	GILIiShares Bloomberg World Govt Inflation-Linked Bond	0.20%	193M	physical	accumulating	+1.5%	-1.8%	-9.8%
79	EXHBiShares Bloomberg Euro Treasury 3-7yr	0.15%	189M	physical	distributing	-0.8%	+1.2%	-0.7%

Key takeaways

1The cheapest bond ETFs have a TER of 0.05-0.07%, making bonds one of the most accessible asset classes.
2Duration determines rate sensitivity: a 1% rate increase causes a bond ETF with 7-year duration to drop roughly 7%.
3Euro government bonds offer maximum safety; investment grade corporate bonds add yield with moderate risk.
4Aggregate ETFs (Bloomberg Euro Aggregate) combine sovereign and corporate bonds in a single product — ideal for simplifying the bond allocation.
5Bond ETFs are generally not PEA-eligible — they sit in a brokerage account or life insurance wrapper.
6After the 2022-2023 rate hikes, bond yields once again offer an attractive risk premium for long-term investors.

Frequently asked questions

How much of my portfolio should be in bonds?

The classic rule is to hold a bond percentage close to your age (30 years old = 30% bonds, 60 years old = 60% bonds). It's a simplification, but the principle is sound: the shorter your investment horizon, the higher the bond allocation should be to reduce volatility. A young investor with a 20+ year horizon can get by with 10-20% bonds, while a retiree would aim for 50-70%.

Do bonds lose money when interest rates rise?

Yes, the price of existing bonds falls when rates rise — this is interest rate risk. In 2022, bond ETFs lost 10-20% depending on duration, which surprised many investors accustomed to seeing bonds as "risk-free". However, if you hold the ETF long enough, the higher yield from new bonds added to the fund gradually offsets this capital loss. The shorter the duration, the faster the recovery.

Should I choose a euro bond ETF or a euro-hedged ETF?

If you're investing in euro-denominated bonds (European sovereign, euro corporate), there's no issue — no currency risk. For US bonds (Treasuries, USD corporate), a euro-hedged ETF eliminates currency risk at a hedging cost (generally the rate differential between the two zones). For bond investments, hedging is recommended because bonds are supposed to stabilise the portfolio — adding currency risk works against that objective.

What duration should I choose for a bond ETF?

In a rising rate environment, favour short-duration bonds (1–3 years) that are less sensitive. When rate cuts are expected, long-duration bonds (10+ years) offer better capital gain potential. An aggregate covers all maturities.

Fixed-maturity bond ETFs: what’s the benefit?

Fixed-maturity ETFs (iShares iBonds, BulletShares) behave like individual bonds with a set maturity date. At maturity, the capital is returned. They combine the diversification of an ETF with the predictability of a bond.

Should young investors hold bonds in their portfolio?

Even with a long-term horizon, 10–20% bonds reduce portfolio volatility and provide capital to reinvest during equity corrections. The ‘100 minus age = % equities’ rule is a starting point, to be adapted to your risk tolerance.

Data sourced from fund factsheets. Last updated 2025-05.

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Best Bond ETFs

BND — Bloomberg U.S. Aggregate Float Adjusted

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How to choose a bond ETF

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Key takeaways

Frequently asked questions