Today, we’re going to look at Vanguard investment-grade bond ETFs — a three-part suite of Vanguard funds that provide investors with exposure to the corporate debt space.
Investors typically look toward investment-grade bonds to provide a middle ground of income and safety out of their debt holdings. High-rated corporate debt isn’t as secure as sovereign U.S. debt, and thus it offers higher yields as a result — but because they’re safer than junk bonds, they tend to yield less than poorly rated debt.
In short, investment-grade bonds are a little bit of Column A, and a little bit of Column B.
Today, we’re going to take a quick look at three Vanguard bond ETFs in the investment-grade corporate space, which span three different levels of duration, which in turn affects the funds’ stability and yield
Vanguard Investment-Grade Bond ETFs
Vanguard Short-Term Corporate Bond ETF (NASDAQ:VCSH): Vanguard’s VSCH targets debt on the shorter end of the bond life cycle, investing in bonds with maturities of between 1 and 5 years. Currently, the average effective maturity is 2.9 years, and the average duration – which is a way to measure sensitivity to interest-rate movement — is 2.7 years. VCSH currently yields 2.22%. Expenses are 0.07%, or $7 annually for every $10,000 invested.
Vanguard Intermediate-Term Corporate Bond ETF (NASDAQ:VCIT): Vanguard’s VCIT sets its goal a little further down the line, investing in bonds with maturities of between 5 and 10 years. Naturally, effective maturity is longer than VCSH at 7.5 years, and duration is too, at 6.4 years. Because of the additional risk given the longer maturity of the bonds, VCIT yields more than VCSH, at 3.41%. Expenses are 0.07%.
Vanguard Long-Term Corporate Bond ETF (NASDAQ:VCLT): The VCLT is the highest yielding of Vanguard’s investment-grade bond ETFs, boasting a 4.5% yield as of this writing. This fund invests in the longest-dated debt of the trio, at 10 to 25 years. However, VCLT is much more sensitive to interest-rate hikes than VCSH and VCIT thanks to its average effective maturity of 23.6 years and duration of 13.9 years. Expenses are 0.07%.
As of this writing, Kent Thune did not personally hold a position in any of the aforementioned securities. His No. 1 holding is his privately held investment advisory firm. Under no circumstances does this information represent a recommendation to buy or sell securities.