While 2022 was a brutal year for bonds, fixed income enjoyed many tailwinds this year, from high interest rates to lowered inflation to a less volatile economy. This made 2023 the year for fixed income. And in particular, it was a good year for Vanguard.
VettaFi’s Vice Chairman Tom Lydon called the firm the Hoover of the ETF industry, for the way it’s vacuumed up investor dollars.
“They are just rock solid. They’re just steady,” he said. They have so many choices.”
See more: Consider Vanguard’s Treasury ETFs as Government Bonds Rally
Vanguard crossed the $2 trillion in U.S.-listed ETF assets under management earlier this year. And just this month, one Vanguard fixed income ETF reached $100 billion in assets, making it the first fixed income ETF to cross this threshold.
So, as 2023 comes to a close, let’s check out just how much investor capital Vanguard’s fixed income ETFs hoovered up this year.
All inflow data is yea to date as of December 20.
See more: Seek Tax-Loss Harvesting Opportunities Within Fixed Income ETFs
5. The Vanguard Tax-Exempt Bond ETF (VTEB ) ($6.3 billion)
Valuations for muni bonds have traded at levels not seen since the global financial crisis. And with munis posting 5.9% total returns month, investors saw this asset class offering high rewards with low risk.
According to Vanguard, muni yields are at the highest absolute levels in a decade, with the top-line yield for the broad market trading above the 98th percentile over the last 20 years.
Vanguard’s VTEB invests in investment-grade muni bonds with maturities between zero and seven years. It seeks to track the S&P 0-7 Year National AMT-Free Municipal Bond Index. It’s drawn in $6.3 billion in investor capital.
4. The Vanguard Long-Term Treasury ETF (VGLT ) ($6.5 billion)
High inflation, the Fed aggressively hiking rates, and a so-called term premium pushed up long-term Treasury yields 30 basis points from where it started this year. And while the world’s most boring baking crisis was partially triggered by banks having too much capital locked up in long-term Treasury funds, investors couldn’t resist those high yields. So, VGLT brought in $6.5 billion this year.
3. The Vanguard Total International Bond ETF (BNDX ) ($7.04 billion)
While U.S. fixed income got a lot of attention from investors and media outlets alike, international bonds also got a lot of love. That’s probably because international bonds are producing better yields than their domestic counterparts.
BNDX offers broad fixed income exposure across major bond markets outside of the U.S. The fund brought in more than $7 billion in investor dollars this year. So far this year, the fund has outperformed the Bloomberg US Aggregate by 3.25 percentage points.
2. The Vanguard Intermediate-Term Treasury ETF (VGIT ) ($7.6 billion)
Treasuries became a safe haven for investors this year, as many were expecting a recession to hit the economy in Q4. But as that economic downturn never appeared, many investors decided to venture out toward the middle end of the duration curve. That served VGIT well, bringing in $7.6 billion in investor capital.
1. The Vanguard Total Bond Market ETF (BND ) ($16.4 billion in inflows YTD)
Vanguard’s broad bond market fund brought in more than $16 billion investor capital thus far this year. This helped push the fund’s AUM over the $100 billion mark, making it the first fixed income ETF to cross this threshold.
BND provides broad exposure to taxable investment-grade U.S.-dollar-denominated bonds (excluding inflation-protected and tax-exempt bonds). Plus, the fund only charges 3 basis points.
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