ETF Spotlight on Vanguard Total Bond Market ETF (BND, part of an ongoing series.)
Assets: $15.2 billion.
Objective: The Vanguard Total Bond Market ETF tries to reflect the performance of the Barclays Capital U.S. Aggregate Float Adjusted Index, which includes a wide range of public, investment-grade, taxable, fixed-income securities traded in the U.S., such as government, corporate, international, mortgage-backed and asset-backed securities and bonds.
What You Should Know:
- Vanguard sponsors the fund.
- BND has an expense ratio of 0.11%.
- As of Feb. 29, the fund held 5086 securities.
- Portfolio allocations by credit rating include: U.S. government 69.7%, Aaa 3.7%, Aa 5.3%, A 11.3% and Baa 10.0%.
- Issuer allocations include: asset-backed 0.2%, commercial mortgage-backed 2.3%, finance 7.3%, foreign 5.6%, government mortgage-backed 27.2%, industrial 11.8%, other 0.6%, Treasury/agency 42.6% and utilities 2.4%.
- The ETF has an average maturity of 7.2 years and an average duration of 5.1 years.
- BND has a SEC yield of 2.17%.
- The fund is down 1.3% over the past month, down 0.2% over the last three months but up 7% over the last year.
- BND has fallen 0.1% below its 200-day exponential moving average.
- "Vanguard Total Bond Market ETF BND tracks the Barclays Capital Aggregate Float-Adjusted Bond Index, widely used as a proxy for the U.S. investment-grade bond market," according to Morningstar analyst Timothy Strauts.
- "Investors worried about rising interest rates should note that the fund's average effective duration (a measure of interest-rate sensitivity) usually floats between 4.0 and 5.0 years, meaning that a 1-percentage-point rise in rates will reduce BND's price between 4% and 5%," Strauts added.
The Latest News:
- Last week, After Tuesday's largest drop in almost three weeks, safe-haven Treasuries rebounded on the weaker-than-expected Eurozone bond auctions and concern of lingering sovereign debt problems, reports Susanne Walker for Bloomberg.
- "The problems in Europe aren't over," Sean Murphy, a trader at Societe Generale, said in the article. "We're getting a re-think of the reaction to the FOMC minutes. It's not as hawkish as was feared. The reality is that it's more data dependent from here."
- The strengthening U.S. economy is diminishing the need for a central intervention.
- Observers were hoping for a QE3 but some believe a Operation Twist 2 is more feasible.
- "While further easing is obviously something that's conceivable, I wouldn't favor it unless conditions deteriorated quite substantially," Fed Bank of Richmond President Jeffrey Lacker said in the article.
Vanguard Total Bond Market ETF
Max Chen contributed to this article.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.