BND and AGG both hold the US investment-grade bond market for 0.03% a year. Here is the small difference between their indexes, what they hold, how they did in 2022, their yields today, and when a retiree needs something shorter instead.
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They are functionally interchangeable, so pick by platform and stick with it. Both track the same market: investment-grade, US dollar, fixed-rate taxable bonds, meaning Treasuries, government-related and corporate bonds, agency mortgage-backed securities and smaller slices of asset-backed and commercial mortgage bonds (Bloomberg US Aggregate Index rules). Neither holds junk bonds, TIPS or municipal bonds.
Scope: the core bond holding of a US retirement portfolio. Excluded: TIPS (see SCHP vs VTIP vs TIP), cash and T-bill funds, municipal bonds and active bond funds. Education, not advice for your situation.
| Situation | A core fund like BND or AGG | Something else may fit better |
|---|---|---|
| Bonds held for 7+ years to balance stocks | Yes | — |
| Withdrawals planned in the next 1–3 years | Can be down when you sell | Short bond fund, T-bills or a ladder |
| High tax bracket, bonds in a taxable account | Interest is taxed as ordinary income | Consider municipal bonds |
| You want inflation protection | No inflation link | TIPS funds |
| Your 401(k) has a stable value fund | Still useful elsewhere | Compare the plan option first |
From the issuers as of Sep 30, 2026, unless noted; trailing returns are NAV returns. Holdings counts are the issuers’ own; third-party data often understates the number of bonds in Vanguard’s funds. Distribution yield, 2022 return and drawdown from Exent market data (daily total return with distributions reinvested).
| BND (Vanguard) | AGG (iShares) | |
|---|---|---|
| Index | Bloomberg U.S. Aggregate Float Adjusted Index | Bloomberg US Aggregate Bond Index |
| Bonds held | 11,434 (Sep 30) | 13,445 (Oct 23) |
| Expense ratio | 0.03% | 0.03% |
| Assets | $161.4B ETF / $389.3B whole fund | $135.7B |
| Inception | Apr 3, 2007 | Sep 22, 2003 |
| Average duration | 5.7 years | 5.71 years (effective, Oct 22) |
| Average maturity | 8.3 years | 8.21 years |
| 30-day SEC yield (Oct 22, 2026) | 5.12% | 5.05% |
| Distribution yield, trailing 12 months (Sep 30, 2026) | 4.17% | 4.19% |
| 1-year return (NAV) | −1.82% | −1.87% |
| 3-year return, per year (NAV) | 4.04% | 4.05% |
| 5-year return, per year (NAV) | −0.64% | −0.64% |
| 10-year return, per year (NAV) | 1.13% | 1.11% |
| 2022 return | −12.95% | −13.02% |
| Largest drop, 5 years to Sep 30, 2026 (daily) | −17.2% | −17.3% |
Two yields, two meanings. The SEC yield reflects the interest the bonds earned over the last 30 days after expenses, a standardized measure of what the portfolio pays now. The trailing distribution yield looks back 12 months at payouts, so it lags when rates have risen. Neither is the total return, which also includes price changes; the 1-year total return was negative even with a 4% payout.
One adjustment for the Federal Reserve. The parent Bloomberg US Aggregate Index already deducts Treasuries the Fed holds in its open-market account. BND’s float-adjusted version goes further and “reduces the amount outstanding of any position owned by the Federal Reserve,” which takes out the Fed’s agency mortgage-backed securities too (Bloomberg float-adjusted index rules). The idea is to weight only bonds investors can actually buy.
The effect on results has been tiny. Calendar-year returns from 2017 to 2025 were within 0.4 points of each other every year (largest gap 2019: 8.84% vs 8.46%; 2022: −12.95% vs −13.02%, Exent market data), and the 5- and 10-year issuer NAV returns match to the hundredth or two.
Mostly government-backed debt: about two-thirds of each fund is Treasuries and agency mortgage bonds, and the rest is investment-grade corporate and other bonds. The issuers label credit quality differently, so read the two columns separately: Vanguard shows US government debt as its own line, while iShares converts ratings to S&P categories, where Treasuries and agency bonds fall under AA.
| BND by issuer (Sep 30, 2026) | Share | AGG by sector (Sep 30, 2026) | Share |
|---|---|---|---|
| Treasury / agency | 49.4% | Treasury | 46.7% |
| Government mortgage-backed | 19.1% | MBS pass-through | 23.0% |
| Industrial | 14.7% | Industrial | 14.2% |
| Finance | 8.2% | Financial institutions | 8.0% |
| Foreign | 3.4% | Sovereign + supranational | 2.0% |
| Utilities | 2.6% | Utility | 2.5% |
| Commercial mortgage-backed + asset-backed | 2.0% | CMBS | 1.4% |
| Credit quality | BND (Vanguard labels) | AGG (iShares labels) |
|---|---|---|
| US government | 69.0% | counted within AA |
| AAA | 3.1% | 2.2% |
| AA | 3.6% | 73.6% |
| A | 12.0% | 11.8% |
| BBB | 12.2% | 11.5% |
| Below investment grade | 0.0% | 0.0% |
About 13% in the calendar year and about 16% from peak to trough within 2022 (BND −15.9%, AGG −16.0%, Exent market data). Rates rose quickly, and bond prices fall when rates rise. Duration measures how much: Vanguard’s fact sheet explains that a 2-year duration means a price fall of about 2% for a 1-point rise in rates. At 5.7 years, the same rise costs BND and AGG about 5.7%.
The other side of that loss is the higher yield today. A fund that reinvests maturing bonds at higher rates earns more income in the following years, which is why the 3-year return to Sep 30, 2026 was back above 4% a year. More on the trade-off in hedging rising rates and whether bonds still hedge stocks.
Exent calculation, illustrative: a retiree with $400,000 holds 40% in bonds, $160,000 in BND, and asks what happens if rates jump 1 percentage point right away. Inputs: BND’s 5.7-year duration and 5.12% SEC yield; the duration rule of thumb ignores convexity and assumes yields stay at the new level.
| Step | Amount |
|---|---|
| BND holding | $160,000 |
| Price change from a 1-point rate rise (5.7% × $160,000) | ≈ −$9,120 |
| Income at the current SEC yield (5.12% × $160,000), per year | ≈ $8,190 |
| Extra income from the 1-point higher yield (1% × $160,000), per year | ≈ $1,600 |
| Years for the extra income to offset the price drop (≈ duration; 9,120 ÷ 1,600) | ≈ 5.7 years |
| Same rate rise in a short fund like BSV (2.6-year duration) | ≈ −$4,160 |
For bonds held for years, a rise in rates is a temporary dent that higher income fills in, roughly in the time the duration suggests. For money that has to be sold in the next year, the dent is real. That is why many retirees keep near-term withdrawals in something shorter and leave the core fund for later years; see the retirement bucket strategy.
For most balanced retirement portfolios, a core bond fund is a reasonable default for the long-term bond share: broad, cheap and high quality. Two placement notes. Bond interest is taxed as ordinary income, so Vanguard’s asset-location research suggests holding taxable bonds in tax-advantaged accounts first (Vanguard). And core bonds do not always rise when stocks fall: in 2022 BND returned −12.95% while an S&P 500 fund (VOO) returned −18.19% (Exent market data), which is one reason to pair them with cash or shorter bonds rather than rely on them alone. For foreign bonds as a complement, see BND vs BNDX.
| Fund | Pros | Cons |
|---|---|---|
| BND | 0.03% fee; 11,434 bonds; float-adjusted index weights only bonds investors can buy; monthly income; easy to pair with other Vanguard funds. | 5.7-year duration means real losses when rates jump (−12.95% in 2022); interest taxed as ordinary income; no inflation protection. |
| AGG | 0.03% fee; 13,445 holdings; longest track record (2003); the index most bond funds are measured against; monthly income. | Same rate risk (−13.02% in 2022); same tax treatment; smaller than BND’s whole fund, though very liquid. |
Shorter, Treasury-only, broader or international. Index, duration, SEC yield and expense ratio from the issuers (Sep 30 and Oct 22, 2026); 2022 calendar-year return from Exent market data.
| ETF | Index | Duration | SEC yield | Expense ratio | 2022 | Use |
|---|---|---|---|---|---|---|
| BSV (Vanguard) | Bloomberg US 1–5 Year Government/Credit Float Adjusted | 2.6 yrs | 5.03% | 0.03% | −5.5% | Near-term spending money |
| VGIT (Vanguard) | Bloomberg US Treasury 3–10 Year | 4.8 yrs | 5.04% | 0.03% | −10.4% | Treasuries only, no corporate credit |
| IUSB (iShares) | Bloomberg US Universal | 5.53 yrs | 5.29% | 0.06% | −13.0% | Adds some high yield (6.2% below investment grade) |
| BNDX (Vanguard) | Bloomberg Global Aggregate ex-USD Float Adjusted RIC Capped, USD hedged | 6.4 yrs | 3.92% | 0.07% | −12.8% | Foreign bonds, currency-hedged |
The other main alternative is not a fund: a ladder of individual Treasuries maturing when you need the cash. The trade-offs are in bond ladder vs bond fund.
When the money has a near date. Counterexample: a 64-year-old retiring next year who parks two years of spending, $100,000, in BND. A repeat of 2022 would have turned that into about $87,050 ($100,000 × (1 − 0.1295)) just as withdrawals begin. In the same year a 1–3 year Treasury fund (VGSH) lost 3.8% and a T-bill fund (SGOV) gained 1.6% (Exent market data; see SGOV vs BIL vs SHV). BND and AGG suit the part of the bond allocation you will not touch for years, not the next paycheck from your portfolio. See investing near retirement.
A core bond fund like BND or AGG costs 0.03% a year, and over the 15 years to June 30, 2026, 90.49% of actively managed US large-cap funds underperformed the S&P 500 (S&P DJI, SPIVA). Market intel adds context for the stock/bond mix you chose; it does not pick your ETFs, tell you when to trade or guarantee better results.
Neither in any meaningful way. Both charge 0.03%, have a 5.7-year duration and returned −0.64% a year over the 5 years to Sep 30, 2026. BND’s index removes Federal Reserve holdings; AGG’s is the standard Aggregate.
For long-term bond money, a core fund like BND is a common default. For withdrawals in the next one to three years, a shorter fund or ladder is less exposed: BND lost 12.95% in 2022, the short-term BSV 5.49% (Exent market data).
11,434 in the ETF as of Sep 30, 2026, according to Vanguard; the whole fund held 14,254. Some data sites show far lower numbers for Vanguard bond funds.
On Oct 22, 2026 the 30-day SEC yield was 5.12% for BND and 5.05% for AGG. Their trailing 12-month distribution yields to Sep 30, 2026 were 4.17% and 4.19%. Yields change daily.
Interest rates rose fast and bond prices fall when rates rise. With a duration near 5.7 years, each 1-point rise cuts the price by roughly 5.7%; both funds ended 2022 about 13% lower. At today’s yields, the extra income from a 1-point rise takes roughly the duration, about 5.7 years, to offset the price drop.
Bond interest is taxed as ordinary income, so Vanguard’s research suggests placing taxable bonds in tax-advantaged accounts first and stock index funds in taxable accounts.
It holds only investment-grade bonds, about two-thirds Treasuries and agency mortgages, so default risk is low. Its price still moves with interest rates; it fell 13.02% in 2022.
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Educational content, not investment advice. Examples are illustrative; past performance does not guarantee future results.