The universe of bond ETFs is expanding rapidly, creating new opportunities for the discerning investor.  For those just taking an interest in bonds, however, the myriad of options can be overwhelming.

Top ETFs for the Bond Market’s Major Sectors

The bond market is a big asset class. Just within the US, there are short and long-dated Treasury bonds, corporate bonds across a range of credit ratings, inflation-protected securities, and a variety of structured products like US mortgage-backed securities.

Conveniently, the universe of bond ETFs has expanded to the point where an investor who knows exactly the nature of market exposure they want can usually achieve those objectives in deploying a range of bond ETFs.  For those less familiar with the types of market exposure available within fixed income and is not well versed in bond ETFs, where does one start?

Below you will find short lists of the top ETFs in the most common sectors of the bond market. All of them are passive funds that aim to track a well-known bond benchmark, and all are large, liquid, funds from reputable providers.  Like so many ETFs, their fees range but are typically among the most cost-effective ways to gain exposure to the asset class.  Please note that the summary below is intended to lay out the major fixed-income asset classes with example ETFs for each, but our selection should not be construed as an investment recommendation or investment advice.

US Treasury ETFs: Income Opportunity Higher Interest-Rate Sensitivity

US Treasuries are often referred to as “risk-free” investments.  This originates in the view the U.S. government will never default, the current debate over the debt ceiling highlights the possibility. Notwithstanding this concern, a US-Treasury ETF offers both income and substantial exposure to the direction of interest rates.

Long-Maturity Treasuries: Income and Significant Interest-Rate Exposure

A case can be made that interest rates may be near their cyclical peak and thus owning Treasury bonds could offer both income as well as the potential for significant future capital gains. If that is your view, a longer-maturity bond ETF may be right for you.

Top Longer-Maturity Treasury ETFs

Ticker	Provider	Expense Ratio	AUM	Inception	Index Tracked
TLT	Blackrock	0.15	$37bn	2002	ICE BofA US Treasury 20+ Year Bond
SPTL	State Street	0.06	$7bn	2007	Bloomberg US Long Treasury
VGLT	Vanguard	0.04	$6bn	2009	Bloomberg US Long Treasury

Notes: Fund data is recent as of publication date but is subject to change. AUM is Assets Under Management, and all figures are current approximations.

Short-Maturity Treasuries: Interest Income, Less Interest-Rate Exposure

Short-duration bond ETFs tend to favor bonds that mature within 1-3 years.  In the context of the uncertainty about the US Federal Reserve’s (Fed) plan for interest rates, the shorter duration of these ETFs make them less volatile.  A desire for interest income, less volatility and often a shorter investment horizon commonly leads to considering short-term Treasury ETFs.

Top Shorter-Maturity Treasury ETFs

Ticker	Provider	Expense Ratio	AUM	Inception	Index Tracked
SHY	Blackrock	0.15	$28bn	2002	ICE BofA U.S. Treasury 1-3 Year Bond
VGSH	Vanguard	0.04	$22bn	2009	Bloomberg US Treasury 1-3 Year
SCHO	Charles Schwab	0.03	$14bn	2010	Bloomberg US Treasury 1-3 Year

Notes: Fund data is recent as of publication date but is subject to change. AUM is Assets Under Management, and all figures are current approximations.

Floating-rate Treasuries: Mitigate Interest Rate Sensitivity

While most investors instinctually feel that rising interest rates are bad for bonds, the opposite is generally true with floating-rate bonds. These securities do not have a “fixed” interest rate like traditional Treasury bonds. Instead, they pay a yield that “floats” over a benchmark, such as the Fed’s short-term policy rate. As such, when the Fed raises its benchmark rate, the interest paid on a floating-rate security linked to it goes up.

Top Floating-Rate Treasury ETFs

Ticker	Provider	Expense Ratio	AUM	Inception	Index Tracked
USFR	Wisdom Tree	0.15	$16bn	2014	Bloomberg US Treasury Floating Rate Bond
TFLO	Blackrock	0.15	$6bn	2014	Bloomberg US Treasury Floating Rate Bond

Notes: Fund data is recent as of publication date but is subject to change. AUM is Assets Under Management, and all figures are current approximations based on information available to the public.

Corporate Bond ETFs

While corporate bonds offer a yield premium over comparable maturity Treasury bonds, that yield comes with the credit risk of the underlying pool of corporate credits.  The corporate bond market is large enough to offer investors liquidity, particularly in investment-grade corporate bonds and in most market environments in sub-investment-grade, or high-yield, corporate bonds as well.

Investment-Grade Corporate Bonds

Blackrock’s LQD is the industry leader in investment-grade corporates, and its closest competitor, Vanguard’s VCLT, focuses on the more volatile longer-maturity (10-year and greater) segment of the market. As there is little else to compete with either of these funds, we included a medium-maturity bond fund (also from Blackrock) targeting the 5–10-year segment of the market and a short-maturity fund, targeting the 1–5-year segment, for investors eager to trade a bit more credit and interest-rate exposure for higher yields than they might find in a cash or short-maturity Treasury fund.

Top Corporate Bond ETFs

Ticker	Provider	Expense Ratio	AUM	Inception	Index Tracked
LQD	Blackrock	0.14	$34bn	2002	Markit iBoxx USD Liquid Investment Grade
VCLT	Vanguard	0.04	$6bn	2009	Bloomberg US 10+ Year Corporate Bond
IGIB	Blackrock	0.04	$12bn	2007	ICE BofAML 5-10 Year US Corporate
VCSH	Vanguard	0.04	$36bn	2009	Bloomberg U.S. 1-5 Year Corporate Bond

Notes: Fund data is recent as of publication date but is subject to change. AUM is Assets Under Management, and all figures are current approximations.

Sub-Investment Grade Corporate Bond ETFs

Sub-investment grade corporates, or “High Yield” bonds as they are more commonly known, have greater sensitivity to the economic cycle and thus offer commensurately higher returns. Once again, Blackrock leads the pack amongst high-yield bond ETFs with its HYG fund almost double the size of the next largest competitor, State Street’s JNK fund. As such, our third high-yield fund is another shorter-maturity fund for investors hungry for the yield but seeking a bit less credit and interest-rate risk.

Top High-Yield ETFs

Ticker	Provider	Expense Ratio	AUM	Inception	Index Tracked
HYG	Blackrock	0.48	$15bn	2007	iBoxx $ Liquid High Yield
JNK	State Street	0.40	$8bn	2007	Bloomberg High Yield Very Liquid Index
SHYG	Blackrock	0.30	$5bn	2013	Markit iBoxx USD Liquid High Yield 0-5

Notes: Fund data is recent as of publication date but is subject to change. AUM is Assets Under Management, and all figures are current approximations

Floating-Rate Corporate Bonds: Extra Yield Without the Interest-Rate Risk

Like floating-rate Treasury funds, these ETFs invest in floating-rate corporate debt. The first two track a standard investment-grade (floating) corporate bond index while the third invests in only AAA-rated Collateralized Loan Obligations (CLOs), which are themselves portfolios of high-yield corporate loans.

Top Floating-Rate Corporate ETFs

Ticker	Provider	Expense Ratio	AUM	Inception	Index Tracked
FLOT	Blackrock	0.15	$7bn	2011	Bloomberg US Floating Rate Note < 5 Years
FLRN	State Street	0.15	$2bn	2011	Bloomberg US Floating Rate Note < 5 Years
JAAA	Janus Henderson	0.22	$3bn	2020	n/a

Notes: Fund data is recent as of publication date but is subject to change. AUM is Assets Under Management, and all figures are current approximations.

Emerging Markets Bond ETFs

The three funds listed below all invest in US-dollar denominated debt issued by emerging market (EM) governments. As these borrowers are, by definition, below investment grade, their bonds pay a higher yield than their developed country counterparts. While there are also funds that invest in government bonds issued in the local currency of these emerging markets, (such as EMLC), these investments add currency risk on top of their credit risk, so we did not include them here.

Top Emerging Market US-Dollar Government Bond ETFs

Ticker	Provider	Expense Ratio	AUM	Inception	Index Tracked
EMG	Blackrock	0.39	$14bn	2007	J.P. Morgan EMBI Global Core Index
VWOB	Vanguard	0.20	$3bn	2013	Bloomberg USD Emerging Markets Government RIC Capped
PCY	Invesco	0.50	$2bn	2007	DB Emerging Market USD Liquid Balanced

Notes: Fund data is recent as of publication date but is subject to change. AUM is Assets Under Management, and all figures are current approximations.

Aggregate Bond ETFs: A More Diverse Benchmark

The Bloomberg US Aggregate Bond Index is an industry standard benchmark of US government bonds, investment-grade corporate bonds, and mortgage-backed securities. While the interest-rate risk of the benchmark is relatively high, it provides a fair representation of the overall bond market – which helps explain these ETFs enormous size and (relatively) low cost.

Top Aggregate Bond ETFs

Ticker	Provider	Expense Ratio	AUM	Inception	Index Tracked
BND	Vanguard	0.03	$93bn	2007	Bloomberg U.S. Aggregate Float Adjusted
AGG	Blackrock	0.03	$90bn	2003	Bloomberg U.S. Aggregate Bond
SCHZ	Schwab	0.03	$7bn	2011	Bloomberg U.S. Aggregate Bond

Notes: Fund data is recent as of publication date but is subject to change. AUM is Assets Under Management, and all figures are current approximations.

Final Thoughts

While there may be a healthy debate about the best time to buy more bonds, there is little debate about the value of holding bonds in a diversified portfolio. For those comfortable making their own asset allocation decisions, the ETFs we have listed above provide convenient, liquid, and relatively inexpensive exposure to the major bond sectors.

We close in reiterating that none of the above information should be construed as investment advice, and we strongly encourage you to use the information we have provided above as a tool and to supplement it with additional information, including looking at historical price graphs of the different ETFs to help gauge their volatility across economic and credit cycles.