The Vanguard Intermediate-Term Corporate Bond ETF (NASDAQ:VCIT) offers higher yields through corporate credit, while the iShares 3-7 Year Treasury Bond ETF (NASDAQ:IEI) prioritizes lower volatility and government backing.
Investors seeking fixed-income exposure often weigh the stability of government debt against the potentially higher yields of corporate bonds. Both funds target the intermediate portion of the maturity curve, but they differ significantly in credit risk, duration, and cost. This comparison examines how these characteristics impact total returns and portfolio volatility.
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
The Vanguard fund is notably more affordable with a 0.03% expense ratio compared to 0.15% for the iShares fund. This cost advantage, combined with the yield premium of corporate credit, leads to a higher overall payout. Investors earn a 1.19% yield advantage with VCIT, though this comes with the added risk of corporate debt.
The iShares 3-7 Year Treasury Bond ETF (IEI) replicates the performance of an index composed of U.S. Treasury securities with remaining maturities between three and seven years. It holds 83 government-backed bonds, which historically offer lower volatility than corporate debt. The portfolio consists primarily of intermediate-term Treasury notes. The fund was launched in 2007. The iShares 3-7 Year Treasury Bond ETF has paid $4.28 per share over the trailing 12 months, which, at its recent ~$117 share price, yields 3.70%.
The Vanguard Intermediate-Term Corporate Bond ETF (VCIT) tracks the Bloomberg U.S. 5-10 Year Corporate Bond Index, focusing on investment-grade debt issued by industrial, utility, and financial companies. It is more broadly diversified with 343 holdings, and its largest positions are individual corporate issues. This focus on corporate credit typically results in higher sensitivity to economic cycles than government-backed securities. The fund was launched in 2009. The Vanguard Intermediate-Term Corporate Bond ETF has paid $3.96 per share over the trailing 12 months, which, at its recent ~$82 share price, yields 4.90%.
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