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Top 10 Total Bond, Muni, Preferred-Stock ETFs

This posting completes a comprehensive review in the fixed-income ETF segment. While this review seems a grab-bag collection of issues, we like keeping the list of choices at 10. This seems more manageable for most investors. We're not necessarily recommending one issue over another and where other interesting choices exist we mention them within each featured issue's review. Let's remember, in the fixed-income sector there are many choices, but with many being repetitive it's not necessary to cover them all. Each sponsor might disagree naturally.

Our goal is to cover the most important ETFs within each category using high assets under management, liquidity and/or strategies that make a difference in the critical tests. Newer issues tied to new indices with long (more than five years) of historical data may be worth investigating, featuring and using as a replacement if necessary.

We'll begin our review with Total Bond ETFs which have the characteristic of incorporating many different maturities and issues into one all-inclusive issue.

AGG (iShares Barclays Aggregate Bond Fund ETF) follows the Barclays Capital U.S. Aggregate Bond Index. It is the first, (launched September 2003) of several bond ETFs with a mix of U.S. Government, mortgage-backed, investment grade corporate and even some municipal bond securities. AUM (Assets under Management) exceeds $12 billion, average daily trading volume is over 750K shares and the expense ratio is .24%. The credit quality is all above BBB with 75% being AAA, while the maturity range is roughly 60% below 10 years with the balance 20 years or longer. The 12 month yield as of June 9, 2011 is 3.37%.

Data as of 6-03-2011

AGG Top Ten Holdings

  1. US Treasury Note        4.75%:                         3.76%
  2. US Treasury Bond       7.5%:               2.58%
  3. US Treasury Note        3.625%:           2.52%
  4. US Treasury Note        3.125%:           2.35%
  5. US Treasury Bond       8.125%:           2.02%
  6. Freddie Mac                4.5%:               1.94%
  7. US Treasury Note        3.375%:           1.93%
  8. US Treasury Note        1.75%:                         1.47%
  9. US Treasury Bond       7.625%:           1.47%
  10. US Treasury Bond       4.625%:           1.26%

 BND (Vanguard Total Bond Market ETF) also follows the Barclays U.S. Aggregate Bond Index and was launched in March 2003. Given the index, you'll not find much variation in holdings, durations or credit quality. The major difference is the expense ratio is .12% or half AGG and with yields this low it does make a difference. AUM equals $10 billion and average daily trading volume is near 800K shares. The current yield is around 2.67% but the total return over the past 12 months is nearly 5%.

You should also note Vanguard offers BSV (Vanguard Short-Term Bond ETF) which would compete nicely with previously featured SHY (iShares Short-Term Treasury ETF) 

Data as of 6-03-2011

BND Top Ten Holdings

  1. CMT Market Liquidity Rate:                 2.94%
  2. US Treasury Note        1.75%:            1.11%
  3. US Treasury Bond       6.25%:            0.88%
  4. US Treasury Note        0.375%:           0.88%
  5. US Treasury Note        1.375%:           0.85%
  6. US Treasury Note        0.75%:                         0.83%
  7. US Treasury Note        1.875%:           0.82%
  8. US Treasury Note        1.375%:           0.76%
  9. US Treasury Note        2.75%:                         0.65%
  10. US Treasury Note        1.75%:                         0.58%


GBF (iShares Barclays Government/Credit Bond ETF) tracks the Barclays Capital U.S. Government/Credit Bond Index was launched in January 2007. The AUM is a little over $100M and average daily trading volume is less than 6K shares. This ETF follows a wide range of bond issues with maturities greater than 1 year with roughly 47% below 5 years and balance evenly spread beyond. Over 65% of the assets are AAA rated with the balance investment grade except for 1.25% non-rated. The expense ratio is .20% and the one year return as of March 2011 was 5.11% while the current yield is roughly 3%.

Data as of June-03-2011

GBF Top Ten Holdings

  1. US Treasury Note        4.75%              7.70%
  2. US Treasury Note        4.625%            6.40%
  3. US Treasury Note        3.625%            5.70%
  4. US Treasury Note        1.375%            4.42%
  5. US Treasury Bond       7.625%            2.90%
  6. US Treasury Note        2.375%                        2.62%
  7. Bank of America           3.125%            2.37%
  8. US Treasury Note        1.25%              2.33%
  9. US Treasury Note        1.25%              2.33%
  10. US Treasury Note        0.625%                        2.31%

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