Vanguard Edges into Bond ETF Market

Vanguard is adding exchange-traded funds (ETFs), which will be structured as separate share classes of existing mutual funds, to its four existing bond index funds in an effort to expand its presence in the U.S. bond market.

According to a press release from the mutual fund company, the firm’s four bond funds include the Vanguard Total Bond Market Index Fund, the Vanguard Short-Term Bond Index Fund, the Vanguard Intermediate-Term Bond Index Fund, and the Vanguard Long-Term Bond Index Fund.

The four bond ETFs will provide investors with exposure to the entire U.S. bond market at a cost of 0.11% and will be managed by Vanguard’s fixed income group, according to the release.

Vanguard Total Bond Market ETF will be a share class of the Vanguard Total Bond Market Index Fund, which tracks the performance of the market-weighted Lehman Brothers Aggregate Bond Index and holds nearly 2,800 corporate, Treasury, agency, and mortgage securities.

The other three ETFs are as follows:

  • Vanguard Short-Term Bond tracks the Lehman Brothers 1-5 year Government/Credit Index

  • Vanguard Intermediate-Term Bond ETF tracks the Lehman Brothers 5-10 year Government/Credit Index

  • Vanguard Long-Term Bond ETF tracks the Lehman Brothers Long Government/Credit Index

Vanguard’s ability to offer bond ETFs is pending approval by the Securities and Exchange Commission.