Fixed income investors these days may be tasked with looking for opportunities that can provide the best blend of yield, while at the same time mitigating rate risk. The melding of those two benefits is available in the Vanguard Intermediate-Term Bond ETF (BIV).
BIV offers a diverse portfolio of bonds within the dynamism of an ETF wrapper, while still offering increased credit quality with above 50% of its holdings in Treasuries. However, to add additional yield albeit increased credit risk, the ETF adds bonds rated A and BBB. The fund was listed as part of Morningstar's choice selections in the intermediate bond range.
"The fund actually owns more government notes than its rivals but has benefited from a difference that appears further down the credit ladder," Morningstar noted. "It holds twice as many A and BBB rated notes as do the other seven funds, which explains both its higher returns and income."
BIV tracks the Bloomberg U.S. 5-10 Year Government/Credit Float Adjusted Index. That is a market-weighted bond index that covers investment-grade bonds with a dollar-weighted average maturity of that intermediate range of five to 10 years.
With interest rate cuts looming, it's an ideal time for exposure to BIV while yields are still elevated. Additionally, it boasts a low expense ratio, like many of Vanguard's bond ETFs do.