The fixed-income market had both winners and losers following the Federal Open Market Committee’s (FOMC) policy meeting in September.
According to the meeting minutes, recent data showed that economic growth had slowed in the first half of the year, job gains had weakened and unemployment had edged up, though it remained relatively low. Inflation, while down from its 2022 highs, remained somewhat elevated.
In response, the FOMC voted to cut the federal funds rate by 25 basis points, setting a new target range of 4% to 4.25%. The decision reflected a shift in balance between the committee’s dual mandate of stable prices and maximum employment, as members noted rising downside risks to the labor market.
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The immediate losers from the rate cut were money market funds and ultra-short-term bond funds. Income expectations from both move in near lockstep with the federal funds rate, meaning lower short-term rates translate directly into lower yields. That’s a sharp contrast to 2022, when investors could earn 5% or more on low-risk cash equivalents after a rapid series of rate hikes.
The potential winners are longer-duration bond funds. Duration, measured in years, indicates how much a bond’s price changes inversely when interest rates move. When rates fall, newly issued bonds offer lower yields, which makes existing bonds with higher coupons more valuable. As a result, bond prices typically rise when interest rates decline.
While other variables such as credit spreads, inflation expectations and supply-and-demand conditions also affect prices, the shift marks a clear departure from the rising-rate environment of 2022, which caused some of the steepest bond market losses in decades.
Here’s a look at nine of the best bond exchange-traded funds (ETFs) to buy for 2025:
| ETF | Expense ratio | 30-day SEC yield |
| Vanguard Total Treasury ETF (ticker: VTG) | 0.03% | 3.9% |
| Vanguard Core-Plus Bond ETF (VPLS) | 0.20% | 4.5% |
| BondBloxx USD High Yield Bond Sector Rotation ETF (HYSA) | 0.55% | 6.8% |
| iShares MBS ETF (MBB) | 0.04% | 4.2% |
| iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) | 0.14% | 4.9% |
| Schwab 5-10 Year Corporate Bond ETF (SCHI) | 0.03% | 4.7% |
| Schwab Long-Term U.S. Treasury ETF (SCHQ) | 0.03% | 4.7% |
| Xtrackers USD High Yield Corporate Bond ETF (HYLB) | 0.05% | 6.8% |
| SPDR Blackstone Senior Loan ETF (SRLN) | 0.70% | 7.3% |
Vanguard Total Treasury ETF (VTG)
“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.”
VTG is one of Vanguard’s newer bond ETFs. It tracks the Bloomberg U.S. Treasury Total Return Unhedged USD Index, which owns over 270 short-, intermediate- and long-term Treasury bonds for a 0.03% expense ratio. The ETF has an average duration of 5.7 years and pays a 3.9% 30-day SEC yield.
Vanguard Core-Plus Bond ETF (VPLS)
“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 Stephen McFee, senior portfolio manager at Vanguard.
VPLS is designed to potentially outperform an aggregate bond index fund by allocating to out-of-benchmark securities like high-yield bonds and emerging-market bonds. The ETF currently pays a 4.5% 30-day SEC yield and is very affordable for an actively managed ETF, thanks to a 0.2% expense ratio.
BondBloxx USD High Yield Bond Sector Rotation ETF (HYSA)
“With yields still elevated, volatility lingering and central banks exercising caution, we believe bonds will continue to drive portfolio returns,” says JoAnne Bianco, partner and senior investment strategist at BondBloxx. The firm offers HYSA, which employs a unique, active sector rotation strategy.
This ETF uses a fund-of-funds structure to encompass a variety of other BondBloxx sector-specific high-yield bond funds. This approach allows the fund to dynamically tilt exposure toward sectors with improving credit fundamentals or attractive relative valuations. HYSA pays a 6.8% 30-day SEC yield.
iShares MBS ETF (MBB)
“Mortgage-backed securities (MBS) ETFs offer yields that are comparable to investment-grade corporate bonds, accompanied with high credit quality and monthly cash flows,” says Dave P. Francis, investment advisor and principal at Bartlett Wealth Management. MBB is one of the largest ETFs in this segment.
This ETF captures a wide swath of the agency-backed MBS market, with more than 11,000 holdings from Ginnie Mae, Fannie Mae and Freddie Mac. Investors can expect an average duration of 5.4 years against a 4.2% 30-day SEC yield, along with an AA credit rating. MBB charges a low 0.04% expense ratio.
iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD)
“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.”
Corporate bonds tend to be less liquid than Treasurys, but sticking to investment-grade-rated (BBB and higher) rated bonds mitigates this issue. For example, LQD achieves a low 0.01% 30-day median bid-ask spread by tracking the Markit iBoxx USD Liquid Investment Grade Index. The ETF pays a 4.9% 30-day SEC yield.
[READ: 5 Great Fixed-Income Funds to Buy for 2025]
Schwab 5-10 Year Corporate Bond ETF (SCHI)
“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.”
SCHI tracks the Bloomberg US 5-10 Year Corporate Bond Index, which averages out to a duration of 6.1 years. By focusing on investment-grade corporate bonds, SCHI is able to deliver an income pick-up over Treasury bond ETFs of an equivalent maturity. The ETF currently pays a 4.7% 30-day SEC yield.
Schwab Long-Term U.S. Treasury ETF (SCHQ)
“Long-term bond ETFs invest in bonds with maturities of more than 10 years, are more sensitive to interest rate changes and may experience greater volatility in their returns,” Moss says. “They are suitable for investors who have a long-term investment horizon and can tolerate higher levels of risk.”
SCHQ tracks the Bloomberg US Long Treasury Index, which owns Treasurys with remaining maturities of more than 10 years. This translates into higher interest rate sensitivity, with an average duration of 14 years. The ETF pays a 4.7% 30-day SEC yield and charges a 0.03% expense ratio.
Xtrackers USD High Yield Corporate Bond ETF (HYLB)
High-yield bond ETFs used to be pricey, but advancements in indexing and increasing competition have resulted in fee compression. As a result, some high-yield bond ETFs like HYLB have expense ratios as low as 0.05%. This ETF tracks the Solactive USD High Yield Corporates Total Market Index.
“HYLB also has a shorter duration than most peers and offers superior liquidity, as bonds in the portfolio must have a minimum $400 million float,” says Ben Spalding, head of fixed-income portfolio management for Xtrackers Americas at DWS Group. The ETF currently pays a 6.8% 30-day SEC yield.
SPDR Blackstone Senior Loan ETF (SRLN)
A special type of high-yield bond is the senior loan, which differs from traditional high-yield bonds. Senior loans sit higher in a company’s capital structure, meaning they have first lien rights on assets if the borrower defaults. They also carry floating interest rates priced above a benchmark like the Senior Overnight Financing Rate.
Investors can access this segment through ETFs like SRLN, which uses the Markit iBoxx USD Liquid Leveraged Loan Index as its primary benchmark. Its higher 0.7% expense ratio reflects the complexity of managing this market, but investors are compensated with a competitive 7.3% 30-day SEC yield.
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9 of the Best Bond ETFs to Buy for 2025 originally appeared on usnews.com
Update 10/13/25: This story was previously published at an earlier date and has been updated with new information.
