The 3 Best Vanguard Bond Funds
Key takeaways:
• Vanguard has a strong selection of mutual funds and ETFs.
• Some of Vanguard’s funds invest in bonds and other fixed-income investments.
• Three top Vanguard bond funds are VEMBX, VGIT, and VWAHX.
Overview of Vanguard’s Top Bond Funds
Some of Vanguard’s bond funds have done better than others when you consider both risk and return, earning high marks from fund analysts. Here are three of those funds:
Vanguard Emerging Markets Bond Fund (VEMBX)
Vanguard offers a mutual fund that invests in bonds from organizations in emerging-market countries. These are usually governments or government-backed companies. The ticker symbol is VEMBX. Even though it invests in foreign bonds, many of them are in U.S. dollars or are protected against changes in the dollar’s value.
VEMBX is an investor-shares fund, so you need to invest at least $3,000 to buy it (at Vanguard or any other broker). The fund’s expense ratio is 0.55%, which is low for an actively managed fund. Yes, this fund is actively managed, which is not always the case for Vanguard funds.
There is another version of this fund, called VEGBX. It has the same bonds but requires a $50,000 minimum investment. The management fee is lower at 0.40%. VEGBX is an Admiral-shares fund and is also actively managed.
On Vanguard’s page for VEMBX, the 30-day SEC yield is 6.25%, which is much higher than the interest rate on most savings accounts. VEGBX is paying 6.40%. Since it started, VEMBX has returned an average of 6.57% per year.
Both versions of Vanguard’s emerging-markets fund have a 5-star rating from Morningstar for 5-year and overall performance. For 3-year performance, it has 4 stars. Lipper gives the portfolio 5 stars for all three periods.
What is helping the fund get these high results? Here are some of its holdings:
| Issuer | Coupon | Maturity date |
|---|
| Republic of Hungary | 5.000% | 2/22/27 |
| Kingdom of Jordan | 7.375% | 10/10/47 |
| Banque Ouest Africaine De Developpement | 4.700% | 10/22/31 |
Vanguard Intermediate-Term Treasury Index Fund (VGIT)
If you want more safety than emerging markets give, consider VGIT. This Vanguard bond fund holds U.S. Treasury Notes and Bills that mature in less than 10 years. The effective duration for VGIT is 4.98 years, and its average maturity is 5.60 years. The average credit rating is AAA, so it is very safe. Because of this, the yield is a bit lower. The 30-day SEC yield is currently 4.23%.
VGIT has an expense ratio of just 0.04% because it is passively managed. VGIT also has 4- and 5-star ratings from Morningstar and Lipper for multiple time periods.
Unlike the previous two funds, VGIT is an exchange-traded fund (ETF). So, you can buy or sell it during the market day. If you prefer a mutual fund, VGIT has a similar fund called VSIGX. VSIGX avoids the bid-ask spread of an ETF, but the expense ratio is a little higher (0.07% instead of 0.04%).
Vanguard High-Yield Tax-Exempt Fund (VWAHX)
The last fund on our list is VWAHX. This municipal bond fund invests in local and state bonds that pay higher-than-average returns when you factor in taxes. Most of the bonds in the fund are investment-grade, though the credit rating is not as high as the Treasury fund. The average credit rating of VWAHX is A. Some bonds are AAA, some are BB. The effective maturity is 14.31 years, so most are medium-term.
VWAHX is actively managed and has an expense ratio of 0.17% per year. Its 30-day yield is 4.05% (before taxes). After-tax yields are usually higher.
You need at least $3,000 to invest in this fund, as with all Investor-share Vanguard funds. There is an Admiral-shares version (VWALX) that charges 0.09% per year but needs a $50,000 minimum. Both have the same bonds, which include:
| Issuer | Coupon | Maturity date |
|---|
| Sacramento CA City Unified School District GO | 5.500% | 8/1/52 |
| University of California College & University Revenue | 5.000% | 5/15/43 |
| Pronghorn Valley Metropolitan District GO | 3.750% | 12/1/41 |
Vanguard’s High-Yield Tax-Exempt Fund gets top marks: 5 stars from both Morningstar and Lipper for every period they checked.
Best Commission-Free Brokers
Fees
All Vanguard funds—mutual and ETF—are always no-load funds. When bought at Vanguard, they are also commission-free. Some brokers may charge fees for Vanguard mutual funds, but not all. At Firstrade, they are commission-free.
Best Vanguard Bond Funds Judgment
With low costs, high ratings, and a strong track record, Vanguard’s bond funds are a solid choice.
Updated on 7/30/2025.
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