Are these the best ASX Bond ETFs in Australia?

What is a popular bond ETF in Australia?

A popular bond ETF in Australia is $VAF, which stands for Vanguard Australian Fixed Interest Index ETF. $VAF has gained popularity among investors looking for exposure to the Australian fixed-income market.

This ETF replicates the performance of the Bloomberg AusBond Composite 0+ Yr Index. The fund invests in a wide range of Australian fixed-rate bonds, including government, semi-government, and corporate bonds. By investing in $VAF, investors can gain access to a diversified portfolio of fixed-income securities, potentially benefiting from regular income and the potential for capital appreciation.

Its popularity can be attributed to Vanguard's reputation, its broad range of bonds, and the convenience and low cost-effectiveness of investing in an ETF format.

🎓 Learn more: What are government bonds?→

Top 10 ASX Bond ETFs in Australia

*The list of ETFs mentioned are ranked by assets under management.

Data as of 22 May 2023. Source: Stake, Google Finance, Yahoo Finance.

✅ Sign up to Stake to start investing in the top ASX bond ETFs with $3 brokerage.

👉 Learn more about Stake pricing to discover how seamless investing can be.

Discover these Australian Bond ETFs on the ASX

1. BetaShares Australian Government Bond ETF ($AGVT)

Assets under management (AUM): $425m

Stock price (as of 22/05/2023): $42.77

Stake Platform Bought / Sold (1 Jan 2023 - 22 May 2023): 55% / 45%

AGVT is an ETF that aims to provide investors with exposure to Australian government bonds. It invests in a diversified portfolio of Australian government bonds with maturities between 7 to 12 years. These bonds are issued by the Australian government and are considered low-risk investments. AGVT seeks to track the performance of the Solactive Australian Government 7-12 Year AUD Index.

2. Vanguard Australian Fixed Interest Index ETF ($VAF)

Assets under management (AUM): $1.38b

Stock price (as of 22/05/2023): $45.43

Stake Platform Bought / Sold (1 Jan 2023 - 22 May 2023): 90% / 10%

VAF is an ETF that seeks to track the performance of the Bloomberg AusBond Composite 0+ Yr Index. It invests in a broad range of Australian fixed-rate bonds, including government, semi-government, and corporate bonds. VAF offers investors exposure to the Australian fixed-income market, providing diversification and potential income from coupon payments and capital appreciation.

🆚 Compare VAF vs VGB stock comparison→

3. SPDR S&P/ASX Australian Bond Fund ($BOND)

Assets under management (AUM): $39.93m

Stock price (as of 22/05/2023): $24.49

Stake Platform Bought / Sold (1 Jan 2023 - 22 May 2023): 59% / 41%

BOND is an ETF designed to provide investors with exposure to the Australian fixed-income market. It aims to replicate the performance of the S&P/ASX Australian Fixed Interest Index. BOND invests in a diversified portfolio of fixed-rate bonds issued by governments, semi-government entities, and corporations.

4. iShares Core Composite Bond ETF ($IAF)

Assets under management (AUM): $1.8b

Stock price (as of 22/05/2023): $101.55

Stake Platform Bought / Sold (1 Jan 2023 - 22 May 2023): 78% / 22%

IAF is an ETF that seeks to track the performance of the Bloomberg AusBond Composite 0+ Yr Index. It invests in various Australian fixed-income securities, including government, semi-government, and corporate bonds. IAF provides investors with exposure to the Australian bond market.

🆚 Compare IAF vs VAF stock comparison→

5. Vanguard Australian Government Bond Index ETF ($VGB)

Assets under management (AUM): $887m

Stock price (as of 22/05/2023): $46.70

Stake Platform Bought / Sold (1 Jan 2023 - 22 May 2023): 65% / 35%

VGB is an ETF that aims to replicate the performance of the Bloomberg AusBond Treasury Index. It invests in a portfolio of high-quality fixed-rate Australian government bonds with varying maturities. VGB provides investors with exposure to the Australian government bond market, which is typically considered a low-risk investment.

6. BetaShares Australian Investment Grade Corporate Bond ETF ($OZBD)

Assets under management (AUM): $221m

Stock price (as of 22/05/2023): $44.50

Stake Platform Bought / Sold (1 Jan 2023 - 22 May 2023): Not available

OZBD is an ETF that invests in a diversified portfolio of investment-grade Australian corporate bonds. It aims to track the performance of the Solactive Australian Investment Grade Corporate Bond Select TR Index. OZBD offers exposure to corporate bonds issued by Australian companies that are considered to have higher credit quality.

7. BetaShares Australian Investment Grade Corporate Bond ETF - Currency Hedged ($CRED)

Assets under management (AUM): $511m

Stock price (as of 22/05/2023): $22.30

Stake Platform Bought / Sold (1 Jan 2023 - 22 May 2023): 60% / 40%

CRED is similar to OZBD but includes a currency hedging feature. This ETF invests in a diversified portfolio of investment-grade Australian corporate bonds while seeking to minimise the impact of currency fluctuations between the Australian dollar and foreign currencies. CRED aims to provide investors with exposure to Australian corporate bonds while reducing the impact of currency risk on future performance.

8. Vanguard Global Aggregate Bond Index ETF Hedged ($VBND)

Assets under management (AUM): $748m

Stock price (as of 22/05/2023): $41.26

Stake Platform Bought / Sold (1 Jan 2023 - 22 May 2023): 80% / 20%

VBND is an ETF that offers exposure to global fixed-rate investment-grade bonds while hedging currency risk back to the Australian dollar. It seeks to replicate the performance of the Bloomberg Barclays Global Aggregate Float Adjusted and Scaled Index. VBND provides investors with the opportunity to diversify their fixed-income holdings internationally while mitigating the impact of currency fluctuations on investment returns.

9. iShares Core Corporate Bond ETF ($ICOR)

Assets under management (AUM): $101m

Stock price (as of 22/05/2023): $93.29

Stake Platform Bought / Sold (1 Jan 2023 - 22 May 2023): NA

ICOR invests in a diversified portfolio of investment-grade Australian corporate bonds. The fund aims to track the performance of the Bloomberg AusBond Credit FRN 0+ Yr Index, which includes floating-rate notes issued by Australian corporations. Floating-rate notes have interest rates that adjust periodically based on a benchmark rate, providing investors with potential protection against rising interest rates. ICOR offers exposure to the corporate bond market, allowing investors to earn income from coupon payments while maintaining a focus on credit risk.

10. BetaShares Australian Bank Senior Floating Rate Bond ETF ($QPON)

Assets under management (AUM): $840m

Stock price (as of 22/05/2023): $25.84

Stake Platform Bought / Sold (1 Jan 2023 - 22 May 2023): 67% / 33%

QPON provides investors with exposure to a portfolio of senior floating-rate bonds issued by Australian banks. The ETF aims to track the performance of the Solactive Australian Bank Senior Floating Rate Bond Index. Senior floating-rate bonds are debt instruments with interest rates that adjust periodically based on a benchmark rate. QPON offers potential protection against rising interest rates (interest rate risk) and focuses on the banking sector, providing investors with income from coupon payments while emphasising the credit risk of bank-issued debt.

💡Related: Looking for U.S. Bond ETFs?→

💡Related: 10 U.S. High Yield Bond ETFs to Watch→

Which is the most popular Australian government bond ETF?

The most popular Australian government bond ETF is $VGB. $VGB, which stands for Vanguard Australian Government Bond Index ETF, has gained significant popularity among investors seeking exposure to the Australian government bond market.

As an ETF, it offers the advantage of easy diversification and liquidity. $VGB aims to track the performance of the Bloomberg AusBond Treasury Index, which includes a selection of high-quality fixed-rate Australian government bonds with various maturities. This exchange-traded fund allows investors to participate in the potential income and capital gains or appreciation of Australian government bonds while providing a convenient and cost-effective way to invest with diversified exposure to this asset class.

Its popularity can be attributed to Vanguard's strong reputation, the attractiveness of government bonds as a relatively lower-risk investment option, and the ETF's ability to deliver exposure to a diversified portfolio of Australian government bonds.

What is the Australia 10 Years Government Bond rate?

As of the writing of this article, the Australia 10 Years Government Bond rate was at 3.59%. This rate represents the yield or interest rate on Australian government bonds with a maturity of 10 years.

It indicates the return an investor would receive by holding these bonds until maturity. The 10-year government bond rate is a significant benchmark in financial markets, as it serves as a measure of long-term borrowing costs for the Australian government.

Investors and analysts closely monitor this rate as it provides insights into market expectations for economic growth, inflation, and interest rates over the long term.

Which ASX bond ETF has the best 5-year return?

The iShares Government Inflation ETF ($ILB) is the ETF with the best returns in the last five years, even though it only returned +0.38% in the period, due to the portfolio's sensitivity to the recent rising interest rates.

This ETF is designed to provide investors with exposure to Australian government bonds that aim to protect against inflation. ILB primarily invests in a diversified portfolio of Australian inflation-linked bonds issued by the Australian government. These bonds are specifically designed to adjust their principal and interest payments based on changes in inflation rates, thereby providing a hedge against rising prices.

💡Related: Watch the best ETFs in Australia based on performance→

This does not constitute financial product advice nor a recommendation to invest in the securities listed. Past performance is not a reliable indicator of future performance. As always, do your own research and consider seeking appropriate financial or taxation advice before investing.