BND holds US investment-grade bonds; BNDX holds investment-grade bonds from outside the US with the currency risk hedged back to dollars. Here is what hedging does, how the two compare on yield, duration and risk, how Vanguard uses them in its own target-date funds, and when adding BNDX makes sense.
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They are not substitutes; BNDX is an add-on to BND, not a replacement. BND (Vanguard Total Bond Market ETF) tracks the Bloomberg U.S. Aggregate Float Adjusted Index. BNDX (Vanguard Total International Bond ETF) tracks the Bloomberg Global Aggregate ex-USD Float Adjusted RIC Capped Index (Hedged): government, agency, corporate and securitized investment-grade bonds issued in currencies other than the dollar, “hedged to offset currency exchange rate fluctuations” (BNDX fact sheet).
Scope: US investors choosing the core bond side of a retirement portfolio. Short-term bonds, TIPS and cash reserves are covered in BND vs AGG, SCHP vs VTIP vs TIP and SGOV vs BIL vs SHV. Education, not investment advice.
| Situation (Oct 2026) | BND alone tends to fit | BND + BNDX tends to fit |
|---|---|---|
| You want one simple core bond fund | Yes | Adds a second fund |
| You want the most current income | Yes: higher SEC yield today | Lower SEC yield on the BNDX part |
| Large bond allocation, want more issuers and countries | US only | Yes: about 6,800 more bonds |
| You want to mirror Vanguard target-date funds | No | Yes: about 70/30 |
| You want less interest-rate sensitivity | Shorter duration (5.7) | BNDX is longer (6.4) |
Fund facts and trailing NAV returns (average annual) from Vanguard fact sheets as of Sep 30, 2026; SEC yields from Vanguard’s product pages, Oct 22, 2026. Distribution yields, calendar-year returns and drawdowns are from Exent market data (daily total return); correlations with SPY are an Exent calculation from month-end closes.
| BND | BNDX | |
|---|---|---|
| Index | Bloomberg U.S. Aggregate Float Adjusted | Bloomberg Global Aggregate ex-USD Float Adjusted RIC Capped (Hedged) |
| Currency risk | None (US dollar bonds) | Hedged back to the dollar |
| Number of bonds | 11,434 | 6,837 |
| Average duration | 5.7 years | 6.4 years |
| Average effective maturity | 8.3 years | 8.2 years |
| Credit quality | 69.0% US government; 12.2% BBB | 25.7% AAA, 17.2% AA, 36.9% A, 18.5% BBB |
| Largest countries | United States | France 11.5%, Japan 11.3%, Germany 10.2%, UK 8.2% |
| Expense ratio | 0.03% | 0.07% |
| Assets | $161.4B ETF / $389.3B whole fund | $82.9B ETF / $121.7B whole fund |
| 30-day SEC yield (Oct 22, 2026) | 5.12% | 3.92% |
| Distribution yield, trailing 12 months (to Sep 30, 2026) | 4.17% | 4.67% |
| 1-year return | −1.82% | −0.92% |
| 3-year return, per year | 4.04% | 3.90% |
| 5-year return, per year | −0.64% | −0.06% |
| 10-year return, per year | 1.13% | 1.30% |
| 2022 return | −12.95% | −12.76% |
| Largest drop, 5 years to Sep 30, 2026 (daily) | −17.22% | −15.18% |
| Correlation with SPY, 60 months | 0.62 | 0.67 |
The holdings counts come from Vanguard; some data feeds show only a few hundred bonds for these funds, which is wrong. BNDX’s trailing distributions ran above its SEC yield, while BND’s ran below. For a hedged fund, distributions can include gains on the currency contracts as well as bond interest, so the SEC yield is the cleaner measure of what the bonds themselves pay.
It removes most of the exchange-rate swings, so the fund behaves like foreign bonds bought in dollars. BNDX uses currency forwards. Vanguard’s research explains that a hedge removes unexpected currency moves over the life of each contract (typically one to three months), but “the hedge embeds the interest-rate differential between the two currencies” (Vanguard, May 2026). In plain terms: when US short-term rates are above foreign rates, the hedge tends to add roughly that gap to returns; when they are below, it subtracts it.
Why hedge at all? Vanguard says currency fluctuations, when unhedged, “account for a significant portion of the overall volatility” of international bonds, and its practical rule for multi-asset portfolios is “Hedge fixed income and leave equity unhedged.” The fact sheet warns that hedging may not perfectly offset currency exposure, costs money, and gives up gains when foreign currencies rise.
About 30% of the bond allocation. Vanguard’s target-date construction page shows fixed income split 70% US investment-grade bonds and 30% hedged international bonds, adding that international bond prices are driven by factors “relatively uncorrelated” to those driving US bond prices and that its international bonds “are hedged back to the U.S. dollar” (Vanguard). The same page notes this is “unlike most TDFs”, so holding BND alone is also a mainstream choice. See also target-date fund check, and for the stock side of going global, international ETFs for retirement.
A little. Exent calculation from month-end closes, with the 70/30 mix rebalanced monthly:
| 60 months to Sep 30, 2026 | BND | BNDX | 70% BND / 30% BNDX |
|---|---|---|---|
| Volatility, per year | 6.4% | 5.3% | 6.0% |
| Correlation with BND | 1.00 | 0.88 | — |
Over 120 months the BND–BNDX correlation was 0.86, and the 70/30 mix had 4.9% volatility against 5.2% for BND alone. That is a modest smoothing, not a hedge against a global rate shock: in 2022 both funds lost about 13%, and over the five years to Sep 30, 2026 BND’s largest daily-basis drop was −17.22% against −15.18% for BNDX (Exent market data). Returns for the same period are in the table above. For how bonds behave next to stocks, see bonds as a hedge.
Illustrative: a $200,000 bond allocation, either all BND or 70% BND and 30% BNDX. Inputs: Vanguard expense ratios and 30-day SEC yields as of Oct 22, 2026, held constant for one year.
| All BND | 70% BND + 30% BNDX | |
|---|---|---|
| Amounts | $200,000 BND | $140,000 BND + $60,000 BNDX |
| Yearly fund expenses | $200,000 × 0.03% = $60 | $42 + $42 = $84 |
| Income at SEC yields | $200,000 × 5.12% = $10,240 | $7,168 + ($60,000 × 3.92% = $2,352) = $9,520 |
| Weighted duration | 5.7 years | 0.7 × 5.7 + 0.3 × 6.4 ≈ 5.9 years |
On SEC yields, the split earns about $720 less a year and costs $24 more. The hedge can make up part of that gap while US short-term rates sit above foreign ones, but it is not guaranteed. In return you hold about 18,000 bonds across many countries and, in the last five years, got slightly lower volatility. Whether that trade is worth it is a judgment call, not a free lunch.
| Fund | Pros | Cons |
|---|---|---|
| BND | Very low fee (0.03%); 11,434 bonds, 69% US government by credit quality; higher SEC yield now (5.12%); shorter duration (5.7 years); simple. | US rates only, so one central bank and one economy drive it; lost 12.95% in 2022; 5-year return −0.64% a year. |
| BNDX | Adds 6,837 bonds from developed markets; currency hedged; lower volatility (5.3% over 60 months); 10-year return slightly above BND (1.30% vs 1.13%). | Higher fee (0.07%); lower SEC yield (3.92%); longer duration (6.4 years); hedging has costs and gives up currency gains; more moving parts. |
Expense ratios and holdings from the issuers (AGG Oct 23, SCHZ Oct 22, 2026); IAGG expense ratio from Exent market data:
| ETF | Expense ratio | Holdings | Note |
|---|---|---|---|
| AGG (iShares) | 0.03% | 13,445 | US aggregate bonds, near-identical to BND |
| SCHZ (Schwab) | 0.03% | 12,613 | US aggregate bonds |
| IAGG (iShares) | 0.07% | See issuer page | International investment-grade aggregate bonds; check the hedging policy on the issuer page |
When the goal is income or lower rate risk. Counterexample: a retiree who needs bond income to cover spending in the next few years. BNDX’s SEC yield was 1.20 points below BND’s on Oct 22, 2026, and its duration is longer, so it neither raises current income nor reduces sensitivity to rising rates. For that retiree, a shorter fund, a ladder or a cash reserve does more (bond ladder vs bond fund). BNDX is also an extra fund to rebalance for a small portfolio, where the risk reduction measured above is worth very little in dollars.
Whether you hold BND alone or a 70/30 split with BNDX, the bond mix is a decision you set once and then rebalance; what changes day to day is the rate and currency backdrop around it.
Yes. BNDX tracks a hedged index and uses currency contracts to offset exchange-rate moves, so its returns come mainly from foreign bond prices and interest, plus the rate gap embedded in the hedge.
There is no single answer. Vanguard’s target-date funds put about 30% of their bonds in hedged international bonds, which Vanguard says is unlike most target-date funds. It is a judgment about diversification versus simplicity.
BNDX’s bonds, mostly from Europe, Japan, the UK and Canada, yielded less than US bonds: 3.92% vs 5.12% on Oct 22, 2026. The currency hedge tends to add back roughly the gap between US and foreign short-term rates, which the SEC yield does not fully capture.
Modestly. Over 60 months to Sep 30, 2026, a 70/30 BND/BNDX mix had 6.0% volatility vs 6.4% for BND alone, and the two funds had a 0.88 monthly correlation (Exent calculation).
No. BNDX lost 12.76% in 2022 against 12.95% for BND (Exent market data); hedging removes currency risk, not interest-rate risk.
Both pay interest taxed as ordinary income, so many investors place them in tax-deferred accounts first and keep stock index funds in taxable accounts.
Some global bond funds combine them. Using BND and BNDX separately lets you set your own split, such as the 70/30 mix Vanguard uses in its target-date funds.
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Educational content, not investment advice. Examples are illustrative; past performance does not guarantee future results.