If you are choosing between Vanguard Total Bond Market ETF (NASDAQ:BND) and iShares Core U.S. Aggregate Bond ETF (NYSEARCA:AGG), you are choosing between two funds that look nearly identical on a screener and behave similarly in practice. Both hold roughly 10,000 investment-grade U.S. bonds, have durations near 5.7 years, and currently yield within 4 basis points of each other. The decision usually turns on pennies of expense, the platform you trade on, and a small benchmark quirk most holders never notice.
What each fund is actually tracking
BND tracks the Spliced Bloomberg U.S. Aggregate Float Adjusted Index. AGG tracks the standard Bloomberg U.S. Aggregate Bond Index. The float-adjusted version that BND follows removes bonds held by the Federal Reserve and other central banks from the index weights. Because central banks hold a large slice of Treasuries and agency mortgage-backed securities, float adjustment trims those allocations and tilts BND marginally toward investment-grade corporates relative to AGG. The tilt is small, but it explains why BND’s credit profile shows 69.2% U.S. Government, 14.6% Industrial, and 8.1% Finance exposure, with the remainder split across mortgage-backed, foreign, and utility issuers.
Both funds exclude what most retirees actually need to think about: Treasury Inflation-Protected Securities, high-yield credit, and municipal bonds. “Total” in the name refers specifically to the Aggregate index universe, which excludes several large bond categories. If inflation protection or tax-exempt income matters to your portfolio, neither fund supplies it.
Where the difference shows up
Over the last year, AGG returned 5.19% while BND returned 5.10%, both measured through June 9, 2026. Over ten years, the gap is even tighter: BND at 16.84% versus AGG at 16.82%. The 2022 rate shock and the COVID liquidity crunch hit both funds in lockstep. The float-adjustment tilt is real but small enough that it has not driven meaningful divergence in any recent rate cycle.
With the 10-year Treasury at 4.53% as of June 8, 2026, near the 97th percentile of its trailing 12-month range, both funds carry duration risk, translating to roughly a 5.7% price move for every 100-basis-point shift in rates. In plain terms: a one-point rise in yields would knock about 5.7% off either fund’s price, partly offset by income.
The practical comparison
| Metric | BND | AGG |
|---|---|---|
| Expense ratio | 0.04% | 0.03% |
| 30-day SEC yield | 4.47% (6/5/2026) | 4.51% (6/5/2026) |
| Effective duration | 5.7 years | 5.74 years |
| Total net assets | $102.1B | ~$125B |
| Benchmark | Float-adjusted Agg | Standard Agg |
BND is also a share class of a mutual fund, a structure that Vanguard has historically used to reduce capital gains distributions, while AGG is ETF-only. For taxable accounts, that structural quirk has occasionally given BND an edge on distributions, though both funds have been highly tax-efficient.
The verdict
For most investors, the right answer is whichever fund their brokerage trades commission-free with the tightest spread. On Fidelity, Schwab, or BlackRock platforms, AGG usually wins for liquidity and its 3-basis-point fee. Inside a Vanguard account, BND is the cleaner fit thanks to platform alignment and automatic reinvestment in the mutual fund share class. Retirees using bonds as ballast can hold either without giving anything up. The equation changes only if you need inflation-linked income, high-yield exposure, or tax-exempt interest. None of those are included in the Aggregate index, and neither fund will deliver them, which pushes investors toward inflation protection, credit exposure, or municipal income.
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