BND vs AGG: Best Total Bond Market ETF?

The Two Giants of the Bond ETF World

If SPY and VTI are the stock ETF defaults, then BND and AGG are their bond equivalents. Vanguard's BND (Total Bond Market ETF) and iShares' AGG (Core U.S. Aggregate Bond ETF) together hold over $200 billion in assets and are the benchmark bond funds for millions of investors.

They're remarkably similar — both track versions of the Bloomberg U.S. Aggregate Bond Index — but there are subtle differences worth knowing. Compare BND and AGG at ETFDuel.

What They Track

BND tracks the Bloomberg U.S. Aggregate Float Adjusted Index. AGG tracks the Bloomberg U.S. Aggregate Bond Index. These two indices are nearly identical — both include U.S. investment-grade bonds: government bonds (Treasuries), agency bonds, corporate bonds, and mortgage-backed securities. The "float adjusted" distinction in BND removes bonds held by central banks from the eligible universe, but in practice this creates minimal difference.

Both funds hold roughly 10,000+ bonds. Both have similar average duration (~6 years), credit quality (mostly AAA/AA government bonds), and yield.

Expense Ratios

• BND: 0.03%
• AGG: 0.03%

Tied. Both are essentially free to own. In 2023, iShares cut AGG's expense ratio to match BND's, eliminating what had been a modest edge for Vanguard.

Yield

As of early 2026, both funds yield approximately 4.0-4.5% — reflecting the higher interest rate environment post-2022. Because both track nearly identical indices, their yields differ by less than 0.1% at any given time. The bond rate environment, not the fund choice, is the primary driver of yield.

Duration and Interest Rate Sensitivity

Both BND and AGG have effective durations of approximately 5.8-6.2 years. Duration measures interest rate sensitivity: for every 1% increase in interest rates, you'd expect a fund with 6-year duration to lose roughly 6% in price. The reverse is also true — a 1% rate cut would add about 6% to the price.

This means both funds are intermediate-term bond funds. They carry meaningful interest rate risk — not as much as long-term bond ETFs like TLT (duration ~16 years), but significantly more than short-term bond funds like SHY (duration ~2 years).

Holdings Breakdown (Approximate)

Both funds allocate their holdings similarly:

• U.S. Treasury bonds: ~40-45%
• Mortgage-backed securities (agency MBS): ~25-30%
• Corporate investment-grade bonds: ~25%
• Agency bonds: ~5%

The high government bond allocation (over 70% combined Treasuries + agency securities) means both funds have excellent credit quality. Default risk is minimal — the main risk is interest rate risk.

Liquidity and Trading Volume

AGG has historically had slightly higher daily trading volume than BND, making it marginally more liquid for institutional-sized trades. For retail investors, both are extremely liquid and the difference is irrelevant.

Which Is Better?

Honestly, they're interchangeable for most investors. The few reasons to prefer one over the other:

• Choose BND if: You're at Vanguard and prefer to keep everything in one ecosystem, or you want the marginally broader float-adjusted index methodology.
• Choose AGG if: Your brokerage is iShares/BlackRock, you want maximum trading liquidity, or you're building around other iShares funds.
• Don't overthink it: The expense ratio is identical, the underlying index is nearly identical, and the return difference over any meaningful period will be negligible.

The Broader Bond ETF Ecosystem

BND and AGG are excellent core bond holdings, but they're not the only options. Depending on your needs:

• Want shorter duration (less rate risk)? Consider BNDSH (1-3 year) or SHV (very short-term)
• Want higher yield (more credit risk)? Consider HYG or JNK (high-yield corporate bonds) — but these carry meaningful default risk and correlate more with stocks
• Want international bond exposure? BNDW combines BND with international bonds
• Want inflation protection? VTIP or TIPS ETFs hedge against CPI inflation

How Much Should You Hold in Bonds?

The classic rule of thumb is to hold your age in bonds (e.g., 40% bonds at age 40). Modern guidance often suggests a less aggressive allocation given longer life expectancies and lower expected bond returns. A 30-year-old might hold 10-20% in BND or AGG; a 60-year-old near retirement might hold 40-50%.

The right allocation depends on your risk tolerance, time horizon, and other income sources (Social Security, pension). This is not investment advice — consider your personal situation carefully.

Bottom Line

BND and AGG are effectively the same fund with the same cost. Your choice should be driven by which brokerage you use, not the fund itself. Both are excellent core bond holdings for any diversified portfolio. The more important decision is how much to allocate to bonds — not which bond ETF to use.