Vanguard TTL Bond Mktetf (BND)

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This article describes an exchange traded fund that tracks an index, commodity, currency, or varied basket of securites. View articles referencing this fund.

 

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Jonathan J. Smith

The Vanguard TTL Bond Mktetf (NYSE: BND) is an Exchange Traded Fund (ETF) that tracks various bonds. The ETF includes a variety of fixed income bonds, including treasury bonds, investment grade bonds, and municipal bonds. The inconsistent performance of risk markets caused BND's performance to also be inconsistent in the past fiscal year. Interest rate levels also drive the value of the bonds that BND holds.

Business Growth

In the past fiscal year, BND has seen inconsistent growth, as riskier, higher-returning assets (such as stocks) have seen growth, but have struggled to fully recover from the recession. In the current fiscal year, BND's performance will hinge upon equities growth and the amount of debt issuance.^[1]

Trends and Forces

BND's Performance is at Risk to Interest Rates

In general, as interest rates rise, bond prices fall (and vice-versa) due to discounting. From this, BND's performance is dependent on the interest rate levels. Interest rate levels are determined by the Federal Reserve, who control money supply in the U.S.^[2]

Bonds are Anti-Correlation with Equities

Equity securities, such as stocks and stock market indices, typically garner a higher return than bonds at the cost of a higher risk of losing money. From this, investors would rather buy equities than bonds in low-risk environments (such as growth periods in the U.S. economy), and would rather buy bonds than equities during high-risk environments (such as recessions).^[3]

Competition

• IShares Barclays Aggregate Bond Fund (AGG) AGG holds similar securities as BND.
• Vanguard Intermediate-Term Bond ETF (BIV) BIV also holds similar bonds as BND, but only bonds with intermediate-term maturities.
• Vanguard SHRT TRM BD ETF (BSV) BSV also holds similar bonds as BND, but only bonds with short-term maturities.

References

1. ↑ Seeking Alpha, "Enhancing Fixed Income Returns," 05/16/2011
2. ↑ iStockAnalyst, "U.S. Total Bonds Led By These Etfs (AGG, BND, BIV, PCEF)," 04/27/2011
3. ↑ Seeking Alpha, "ETF Buying Patterns Suggest 'Risk-Off' Trade," 05/19/2011