FILE / BND-AGG
2026 edition
TOTAL BOND ETF PAIR
BND vs AGG: total US bond market in two ETF wrappers
The two dominant total-bond ETFs both track Bloomberg US Aggregate variants at the cheapest end of the bond market. Same coupon stream, near-identical duration, vanishingly small return differences.
QUICK VERDICT
read this if nothing elsePick the ETF if
BND if you are at Vanguard or you simply want the cheapest total-bond ETF on the market. Vanguard's mutual fund counterpart (VBTLX) means you can convert across share classes within Vanguard if you want the auto-invest mutual fund feature later.
Pick the index fund if
AGG if you are at any non-Vanguard brokerage and you want the deepest liquidity in the US total-bond ETF segment. AGG is the larger ETF by AUM and slightly tighter on bid-ask spread.
Both are total US investment-grade bond market ETFs. BND tracks Bloomberg US Aggregate Float Adjusted at roughly 0.03 percent per the Vanguard BND product page. AGG tracks Bloomberg US Aggregate Bond Index at roughly 0.03 percent per the iShares Core US Aggregate Bond ETF page. The Float Adjusted variant excludes bonds held by the Federal Reserve and other official institutions, producing slightly different composition. The yield, duration, and credit-quality outcomes are essentially identical.
Bond ETF distributions are taxed as ordinary interest income in a taxable account. See IRS Topic 403 for the interest-income rules that govern both funds.
FIG. A / SPEC SHEET
Side by side
SECTION 02 / WHAT BLOOMBERG AGGREGATE ACTUALLY HOLDS
One benchmark family, two flavours
The Bloomberg US Aggregate Bond Index (often shortened to "the Agg") is the standard benchmark for the US investment-grade taxable bond market. It includes US Treasuries, US government agency debt, agency mortgage-backed securities, US-issued investment-grade corporate bonds, and a small allocation to US-issued sovereign and supranational investment-grade debt. By market value, roughly 40 to 45 percent is Treasury bonds, 25 to 30 percent is mortgage-backed securities, and 20 to 25 percent is investment-grade corporates, with the residual in agency and supranational debt.
BND tracks the "Float Adjusted" variant. This excludes bond float held by the Federal Reserve, US government agencies, and other official institutions that are unlikely to sell into the market. The result: BND's composition slightly underweights Treasuries relative to AGG's straight-Aggregate composition, particularly during periods of heavy Fed quantitative easing.
In practice, the two funds produce yield, duration, and total-return outcomes that differ by less than 0.1 percentage points over rolling 5-year windows. The Float-Adjusted variant is academically defensible (it excludes inventory that is not actually for sale) but does not produce a meaningful real-world difference for buy-and-hold bond allocations.
SECTION 03 / TAX TREATMENT MATTERS MORE THAN THE FUND PICK
Bond ETFs are tax-inefficient in a taxable account
Both BND and AGG distribute interest income monthly. Bond interest income is taxed at ordinary income rates per IRS Topic 403, not at qualified-dividend rates. For a household in the 24 percent or 32 percent federal bracket, the after-tax yield on a 4 percent bond ETF in a taxable account is closer to 3 percent or 2.7 percent.
The standard guidance from the Bogleheads tax-efficient fund placement wiki is to hold bond funds in tax-advantaged accounts (Traditional IRA, Roth IRA, 401(k)) and to hold the most tax-efficient equity ETFs (VTI, VOO, ITOT) in the taxable account. This placement strategy is not specific to BND versus AGG; both funds carry the same tax treatment.
One exception: a small portion of bond ETF income may be exempt from state taxes if it comes from US Treasury or US agency holdings. Vanguard publishes the state-tax-exempt percentage of BND distributions annually in its tax-information PDFs. iShares does the same for AGG. Check your state-tax software to apply the exemption.
SECTION 04 / DURATION RISK IS THE REAL VARIABLE
Both funds carry ~6 years of duration
Duration measures how much a bond fund's price moves when interest rates change. With an average effective duration of approximately 6 years, both BND and AGG will lose roughly 6 percent of price for every 1 percentage point increase in interest rates, and gain roughly 6 percent of price for every 1 percentage point cut. This was demonstrated in real time during 2022 when the Federal Reserve raised rates by ~4 percentage points and both funds posted total returns near minus 13 percent for the year, the worst in their history.
For investors uncomfortable with that price volatility, shorter-duration alternatives include BSV (Vanguard short-term bond, duration ~3 years) and SHY (iShares 1 to 3 year Treasury). Longer-duration alternatives include BLV (Vanguard long-term bond, duration ~14 years) and TLT (iShares 20+ year Treasury, duration ~17 years). The duration choice within the bond allocation typically matters more than the BND-versus-AGG choice.
For inflation-protection rather than nominal interest exposure, the relevant ETF is Schwab's SCHP or Vanguard's VTIP (Treasury Inflation-Protected Securities). TIPS are a different beast from the Aggregate index and are covered separately. They sit outside the BND-versus-AGG decision.
DESK Q&A
Frequently asked
Q01Is BND or AGG better in a Roth IRA?
Both are equivalent inside a Roth IRA. Tax treatment is irrelevant in a Roth (no taxes on distributions or sales), so the wrapper-and-tax considerations that matter in a taxable account disappear. Pick on the basis of broker convenience: BND if you are at Vanguard, AGG anywhere else.
Q02What is the yield to maturity on BND and AGG?
Both publish a current yield to maturity (YTM) on their fund pages, refreshed daily. The YTM tracks the underlying Bloomberg Aggregate yield closely, currently in the 4 to 5 percent range. The actual distribution yield (what shows up in your account) lags the YTM because the fund holds the existing book of bonds purchased at older yields. Check the issuer's published 30-day SEC yield for the most comparable figure.
Q03Should I hold both BND and AGG for diversification?
No. The two funds hold approximately 80 percent overlap by issuer and over 95 percent overlap in risk exposure. Holding both creates accounting complexity with no diversification benefit. The standard portfolio guidance is to pick one total-bond ETF as your fixed-income anchor.
Q04How often do BND and AGG distribute?
Both distribute interest income monthly. The distribution amount varies month to month based on the underlying coupon stream and the fund's recent purchases. Capital-gains distributions, if any, are typically annual and very small for both funds because of the in-kind ETF mechanism.
Q05Can I use BND or AGG for tax-loss harvesting?
Yes. BND and AGG are not substantially identical funds under any IRS guidance, so they can be paired as wash-sale partners for tax-loss harvesting. If BND drops 5 percent on a rate hike, you could sell BND to harvest the loss and buy AGG immediately (or vice versa) to maintain market exposure. Consult a CPA for your specific tax situation.
Q06Is there a Vanguard mutual fund equivalent of BND?
Yes, VBTLX (Vanguard Total Bond Market Index Fund Admiral Shares) holds the same underlying portfolio as BND under Vanguard's now-expired dual share-class patent. VBTLX has a $3,000 minimum, charges roughly 0.05 percent (one basis point higher than BND), and supports auto-invest. iShares does not have a mutual fund counterpart to AGG.
DISCLOSURES / READ BEFORE ACTING
What this page is, and is not
Investment disclaimer
This site provides education and reference. It is not investment advice and is not a substitute for advice from a licensed financial advisor. For licensed advice, search NAPFA or XY Planning Network for fee-only fiduciary CFPs near you.
Tax disclaimer
This page summarises IRS published guidance. Tax outcomes depend on your specific circumstances. Consult a CPA or licensed tax professional for tax decisions about your accounts.
ETFvsIndexFund.com is independent and not affiliated with Vanguard, Fidelity, Schwab, BlackRock, iShares, Invesco, SPDR, the SEC, FINRA, the IRS, the Investment Company Institute, or Morningstar. Expense ratios, fund minimums, and tax-rate figures cited reflect publicly filed prospectuses and IRS publications and may change. Past performance does not predict future returns.