While inflation has been easing over the past year, bringing it down to the Fed’s target rate remains challenging. Amid this volatile macroeconomic backdrop, best-performing bond ETFs Vanguard Total Bond Market Index Fund (BND) and VanEck Green Bond ETF (GRNB) could be ideal additions to your portfolio for stable returns.
In July, the consumer price index (CPI) increased 3.2% year-on-year. Prices rose 0.2% month-on-month, aligning with the Dow Jones prediction. However, the annual rate was somewhat lower than the 3.3% expectation while higher than in June, resulting in the first increase in more than a year. In addition, the core CPI maintained a 12-month rate of 4.7%.
The Federal Reserve increased the federal funds rate target range to 5.25%-5.5% last month, raising borrowing costs to their highest level since January 2001. Policymakers will keep an eye on the economic outlook and alter monetary policy if new risks emerge.
Lawrence Gillum, fixed-income strategist at independent broker-dealer LPL Financial, said, “We still think high-quality bonds play a pivotal role in portfolios as they have shown to be the best diversifier to equity risk. And it’s best to have that portfolio protection in place before it’s needed.”
Despite the inverse relationship between bond funds and yields, bond ETFs are stabilizing and delivering higher returns than the stock market.
Let’s take a closer look at the fundamentals of these ETFs:
Vanguard Total Bond Market Index Fund (BND)
BND is an exchange-traded fund launched and managed by The Vanguard Group, Inc. The fund invests in investment-grade debt securities, including government, corporate, and international dollar-denominated bonds, as well as mortgage-backed and asset-backed securities. It seeks to track the performance of the Bloomberg U.S. Aggregate Float Adjusted Index.
BND has $84.29 billion in assets under management (AUM). The fund’s top holdings include U.S. Dollar, with a 0.84% weighting, and United States Treasury Notes at 0.75%, due April 30, 2026, with a 0.60% weighting, respectively.
BND currently has 18000 holdings in total. Over the past three months, its net inflows came in at $4.82 billion. In addition, its 0.03% expense ratio is lower than the 0.41% category average.
BND pays a $2.08 annual dividend, which yields 2.94% at the prevailing price. Its four-year average dividend yield stands at 2.48%. BND’s fund has lost marginally intraday to close the last trading session at $70.79.
BND has an overall rating of B, translating to a Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
BND has an A grade for Buy & Hold. It is ranked #13 out of 50 ETFs in the B-rated Intermediate-Term Bond ETFs group. Click here to see all the BND’s ratings for Peer and Trade.
VanEck Green Bond ETF (GRNB)
GRNB is an exchange-traded fund launched and managed by Van Eck Associates Corporation. The fund invests in fixed-income markets of global region. It invests in U.S. dollar-denominated supranational, corporate, government-related, sovereign, and securitized “green” bonds with a maturity of at least 12 months. The fund seeks to replicate the performance of the S&P Green Bond U.S. Dollar Select Index by using a representative sampling technique.
GRNB has $74.70 million in assets under management (AUM). The fund’s top holdings include GACI First Investment Co. at 5.25% with a 1.42% weighting, European Investment Bank at 3.75% with a 1.16% weighting, and followed by Industrial & Commercial Bank of China /Hong Kong Branch/ FRN with a 1.08% weighting.
GRNB currently has 321 holdings in total. Over the past six months, its net inflows came in at 1.18 million. In addition, its 0.20% expense ratio is lower than the 0.41% category average.
GRNB pays a $0.68 annual dividend, which yields 2.97% at the prevailing price. Its average four-year dividend yield stands at 2.21%. GRNB’s dividends increased at 13.5% and 16.4% CAGRs over the past five and three years. Over the past nine months, GRNB has gained marginally to close the last trading session at $22.92.
GRNB’s POWR Ratings are consistent with its promising outlook. The ETF has an overall B rating, which equates to Buy in our proprietary rating system.
It also has an A grade for Buy & Hold, and B for Trade and Peer. It is ranked #38 within the same group. To access all of GRNB’s POWR Ratings, click here.
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BND shares were trading at $70.60 per share on Thursday afternoon, down $0.19 (-0.27%). Year-to-date, BND has declined -0.01%, versus a 15.60% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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