What Is a Bond ETF?

Bond exchange-traded funds (ETFs) are exchange-traded funds (ETFs) that invest solely in bonds. These are comparable to bond mutual funds in that they maintain a portfolio of bonds with various strategies from US Treasuries to high yields and holding periods (long and short). Bond ETFs are comparable to stock ETFs in that they are passively managed and traded on major stock exchanges. Adding liquidity and transparency during times of stress helps to maintain market stability.
Bond ETFs pay out interest in the form of a monthly dividend and capital gains in the form of an annual payout. These dividends are classified as either income or capital gains for tax purposes. Bond ETFs’ tax efficiency, on the other hand, isn’t a major consideration because capital gains aren’t as important in bond returns as they are in stock returns. Bond ETFs are also accessible on a worldwide scale.

Bond exchange-traded funds (ETFs) are a type of exchange-traded fund (ETF) that exclusively invests in bonds. These are similar to bond mutual funds because they hold a portfolio of bonds with different particular strategies—from U.S. Treasuries to high yields—and holding period—between long-term and short-term.

Bond ETFs are passively managed and trade, similar to stock ETFs on major stock exchanges. This helps promote market stability by adding liquidity and transparency during times of stress.