The first two months of 2025 have left investors rattled, largely due to geopolitical uncertainty stemming from the Trump administration’s actions.
The White House has proposed new tariffs on longstanding trade partners, including Canada and the European Union, which has raised concerns about potential trade wars.
Additionally, a hostile White House meeting in late February with Ukrainian President Volodymyr Zelensky over a rare-earth minerals agreement implied to be part of a peace deal with Russia devolved into personal attacks and introduced further global instability.
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These developments occurring within a short time frame have led to market uncertainty, with investors quick to react to negative news by jumping in and out of positions.
This behavior fuels volatility, as seen in the CBOE Volatility Index (VIX), which ended February up 9.5% year to date. The VIX, called “Wall Street’s fear gauge,” measures expected volatility in the S&P 500 based on options trading. A rising VIX signals increased investor anxiety and higher market swings.
Meanwhile, CNN’s “Fear and Greed Index,” which measures investor sentiment, has fallen into the “extreme fear” category. When this index leans heavily toward fear, it often suggests risk-off behavior, with investors preferring safer assets over equities.
While trying to time the market is rarely a good idea, this might be a smart time to reassess your risk tolerance. It’s not just about how much loss your portfolio can handle, but also how much volatility you’re able to stomach without losing sleep.
If you overestimated your risk tolerance after last year’s bull market, it might be wise to rebalance your portfolio by adding fixed-income exchange-traded funds (ETFs) — particularly those that hold high-quality securities with strong credit ratings.
Ideally, focus on investment-grade bonds, which include high-quality corporate bonds and government-issued Treasurys. These assets can provide steady monthly income while keeping your portfolio insulated from market risk.
Here’s a look at nine of the best bond ETFs to buy for 2025:
| ETF | Expense ratio | 30-day SEC yield |
| Vanguard Total Bond Market ETF (ticker: BND) | 0.03% | 4.5% |
| Vanguard Ultra-Short Bond ETF (VUSB) | 0.10% | 4.7% |
| BondBloxx Bloomberg One Year Target Duration U.S. Treasury ETF (XONE) | 0.03% | 4.3% |
| BondBloxx IR&M Tax-Aware Short Duration ETF (TAXX) | 0.35% | 3.6% |
| BondBloxx BBB Rated 1-5 Year Corporate Bond ETF (BBBS) | 0.19% | 4.8% |
| Invesco Investment Grade Defensive ETF (IIGD) | 0.13% | 4.6% |
| SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) | 0.14% | 4.1% |
| iShares MBS ETF (MBB) | 0.04% | 4.1% |
| Schwab Intermediate-Term U.S. Treasury ETF (SCHR) | 0.03% | 4.3% |
Vanguard Total Bond Market ETF (BND)
“Investors have seen bond ETFs successfully weather multiple storms in the markets, including the pandemic sell-off in March 2020,” says John Croke, head of investor choice business activation at Vanguard. “Time and again, bond ETFs have demonstrated their resilience and liquidity for investors.”
Vanguard’s flagship bond ETF, BND, offers investors a one-stop shop solution. This ETF holds over 11,300 investment-grade corporate bonds, mortgage-backed securities (MBS) and Treasurys represented by the Bloomberg U.S. Aggregate Float Adjusted Index. It charges a low 0.03% expense ratio.
Vanguard Ultra-Short Bond ETF (VUSB)
“Rich stock prices and attractive current yields are creating demand for bond ETFs — particularly actively managed ETFs — which helps investors who are seeking portfolio diversification with the additional profit potential that comes from active tilts,” says Steve McFee, senior portfolio manager at Vanguard.
VUSB is one of Vanguard’s most popular active bond ETFs. Instead of tracking an index, Vanguard’s fixed-income team selects high-quality fixed-income securities screened for low maturities, which minimizes interest rate sensitivity. The ETF pays a 4.7% 30-day SEC yield and charges a 0.1% expense ratio.
BondBloxx Bloomberg One Year Target Duration U.S. Treasury ETF (XONE)
“Considering the outlook for continued sticky inflation and the administration’s new policies, the Federal Reserve is in no hurry to ease monetary policy,” explains JoAnne Bianco, partner and senior investment strategist at BondBloxx. “This was underscored in the minutes from the January FOMC meeting.”
Fixed-income investors looking for safety can currently earn a decent 4.3% 30-day SEC yield via XONE while ensuring minimal credit risk. This ETF tracks the Bloomberg U.S. Treasury One Year Duration Index, which tracks closely with short-term interest rates. XONE charges a low 0.03% expense ratio.
BondBloxx IR&M Tax-Aware Short Duration ETF (TAXX)
“TAXX provides exposure to a diversified portfolio of municipal and taxable bonds, a wider opportunity set to improve after-tax total return potential than municipal bonds alone,” explains Tony Kelly, co-founder at BondBloxx. This ETF can be useful to investors in high income brackets.
TAXX currently pays a 3.6% 30-day SEC yield, but BondBloxx estimates that the ETF has a tax-equivalent yield of 5.5%. “The ETF’s short duration of less than two years also means that investors are exposed to lower interest rate risk,” Kelly explains. TAXX charges a 0.35% expense ratio.
BondBloxx BBB Rated 1-5 Year Corporate Bond ETF (BBBS)
“BBBS is one of our top picks in 2025 because we like the combination of its attractive income potential and low volatility compared to longer-dated fixed-income asset classes,” Bianco says. Compared to Treasury bonds, “BBB”-rated corporate bonds pay higher yields in exchange for greater credit risk.
“BBB-rated corporate bonds are persistent outperformers within the U.S. investment-grade universe, driven by their historically higher average coupon income compared to broad U.S. corporate indices,” Bianco explains. The ETF pays a 4.8% 30-day SEC yield and charges a 0.19% expense ratio.
[READ: 5 Great Fixed-Income Funds to Buy for 2025]
Invesco Investment Grade Defensive ETF (IIGD)
“IIGD takes a factor-based approach to the U.S. investment-grade corporate bond market, emphasizing the quality factor,” says Jason Bloom, head of fixed income and alternatives ETF product strategy at Invesco. The quality factor used by IIGD considers a bond’s maturity and credit rating.
“IIGD provides investors with a high-quality tilt for their investment-grade corporate bond allocation, possibly providing greater downside protection relative to the broad investment grade corporate bond market,” Bloom says. The ETF charges a 0.13% expense ratio and pays a 4.6% 30-day SEC yield.
SPDR Bloomberg 1-3 Month T-Bill ETF (BIL)
“Often overlooked in bond ETFs is liquidity — the ability to buy or sell the security quickly, easily and without a large spread,” says Daniel Dusina, chief investment officer at Blue Chip Partners. “A bond ETF’s liquidity, for the most part, is driven by the liquidity of its underlying securities.”
The most liquid bonds are Treasurys with less than a year remaining until maturity, called T-bills. Unsurprisingly, a T-bill ETF like BIL is highly liquid, trading with a very low 30-day bid-ask spread of just 0.01%. BIL pays a 4.1% 30-day SEC yield and charges a 0.14% expense ratio.
iShares MBS ETF (MBB)
“MBS ETFs offer yields that are comparable to investment-grade corporate bonds, accompanied with high credit quality and monthly cash flows,” says Dave Francis, investment advisor and principal at Bartlett Wealth Management. For MBS exposure, iShares offers MBB at a low 0.04% expense ratio.
This ETF tracks the Bloomberg U.S. MBS Index, which holds over 11,200 securities issued by government agencies such as Ginnie Mae, Fannie Mae and Freddie Mac. Investors can currently expect a 4.1% 30-day SEC yield and an “AA”-rated credit quality across the ETF’s entire portfolio.
Schwab Intermediate-Term U.S. Treasury ETF (SCHR)
“Intermediate-term bond ETFs invest in bonds with maturities between three and 10 years,” says Wes Moss, managing partner and chief investment strategist at Capital Investment Advisors. “They offer a balance between risk and return and are suitable for investors who have a medium-term horizon.”
For intermediate Treasury bond exposure, consider SCHR. This ETF tracks the Bloomberg U.S. Treasury 3-10 Year Index, which gives it more price upside relative to T-bill ETFs at the cost of higher volatility. However, it still features excellent credit quality. SCHR pays a 4.3% 30-day SEC yield.
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9 of the Best Bond ETFs to Buy for 2025 originally appeared on usnews.com
Update 03/03/25: This story was published at an earlier date and has been updated with new information.
