iShares Core U.S. Aggregate Bond ETF AGG and Vanguard Total Bond Market ETF BND barely differ
Both charge 0.03% a year, and through October 9, 2026, Vanguard Total Bond Market ETF was ahead by 0.09 percentage points.
Key takeaways
Through October 9, iShares reported a year-to-date net-asset-value return of -2.42% for AGG, with income included. Vanguard reported -2.33% for BND on the same basis, so BND was ahead by 0.09 percentage points, or $9 on $10,000.
Both charge 0.03% a year, which is $3 on that sum, whichever fund you buy.
Counting less of what the Federal Reserve holds
AGG tracks the Bloomberg U.S. Aggregate Bond Index, a measure of the investment-grade bond market in the United States. BND tracks the Bloomberg U.S. Aggregate Float Adjusted Index. Vanguard's fact sheet dated June 30, 2026 says that index includes Treasuries, corporate bonds and agency mortgage-backed securities.
The float-adjusted index counts less of what the Federal Reserve holds. Bloomberg's methodology, dated April 22, 2024, says it reduces the amount outstanding of any position the Fed owns, including mortgage bonds the Fed holds outright.
Lan Anh Tran of Morningstar measured the difference in the funds. In a note published September 26, 2023, Tran reported that as of May 31, 2023, BND held around 6 percentage points less in agency mortgage bonds than AGG, and 2.6 percentage points more in Treasuries, with no material change in credit quality.
The lead has not stayed
For the year ended June 30, 2026, AGG returned 3.80%, 0.01 percentage point above the Bloomberg U.S. Aggregate's 3.79%. BND returned 3.70%, 0.01 percentage point below the float-adjusted index's 3.71%.
The indexes were 0.08 percentage points apart. The funds were 0.10 percentage points apart, with AGG ahead, or $10 on $10,000.
Of that 0.10 percentage point gap, 0.08 percentage point was the gap between the indexes. The other 0.02 percentage point came from the funds finishing on opposite sides of their benchmarks.
From the float-adjusted index's start in June 2009 through June 30, 2023, Morningstar reported that it beat the Bloomberg U.S. Aggregate by 0.04 percentage points a year. The year ended June 30, 2026 went the other way: the Bloomberg U.S. Aggregate led by 0.08 percentage points. Year to date through October 9, BND was ahead of AGG. The lead has not stayed put.
Which fund to own
If you already hold either fund, keep it. Through October 9, BND was $9 ahead on $10,000. Over the year ended June 30, 2026, AGG was $10 ahead. That is not a reason to sell.
For 2025, iShares classified 40.58% of AGG's ordinary dividends as income from US government obligations, in its source-income document dated February 12, 2026. Vanguard classified 44.06% of BND's ordinary dividends that way, in its tax update dated January 20, 2026. The difference is 3.48 percentage points of those dividends, and it describes 2025.
Over the twelve months through the October 1, 2026 payout, each fund paid cash equal to 4.19% of its October 14, 2026 share price. Applied to that cash, the 2025 classification gap is $15 of income on $10,000, and the tax saved, where a state exempts the income, is the state rate times that $15. That saving is not a reason to prefer one fund, next to a return gap of $9 that has already gone the other way.
Vanguard's update says the income is generally exempt in most states, but the state decides whether a fund shareholder may exclude it. The same update says California, Connecticut and New York require 50% of the fund's assets in US government obligations at each quarter-end before that exclusion applies.
iShares says the qualifications vary by state. A state with no income tax has nothing to exempt.
If you are buying for the first time, buy either fund. You get the investment-grade bond market in the United States either way. In the year ended June 30, 2026, most of the gap between the funds was the gap between the indexes, and neither fund has kept the lead.
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Frequently asked questions
How far apart were the year-to-date returns?
Through October 9, on a net-asset-value basis with income included, Vanguard Total Bond Market ETF was ahead by 0.09 percentage points, or $9 on $10,000.
Do the two funds charge the same fee?
Both charge 0.03% a year, which is $3 on $10,000, whichever fund you buy.
What is different about the indexes they track?
iShares Core U.S. Aggregate Bond ETF tracks the Bloomberg U.S. Aggregate Bond Index, while Vanguard Total Bond Market ETF tracks the float-adjusted index that counts less of what the Federal Reserve holds.
Has one fund stayed ahead?
The lead has not stayed put: through October 9, 2026, Vanguard Total Bond Market ETF was ahead, and iShares Core U.S. Aggregate Bond ETF was ahead for the year ended June 30, 2026.
