BND and BNDX provide the bond equivalent of the VTI/VXUS choice for stocks: domestic versus international. Together, they cover the global investment-grade bond market.
What Each Holds
BND tracks the Bloomberg US Aggregate Bond Index — roughly 10,000 US investment-grade bonds including Treasuries, government agencies, and corporate bonds. Average duration is about 6 years. BNDX tracks the Bloomberg Global Aggregate ex-USD Float Adjusted RIC Capped Index — international investment-grade bonds from dozens of countries, hedged to the US dollar.
See the latest data at BND vs BNDX comparison page.
Currency Hedging
BNDX hedges its foreign currency exposure back to US dollars. This is critical because unhedged foreign bond returns would be dominated by currency fluctuations, overwhelming the modest bond yields. With hedging, you capture the diversification benefit of different countries' interest rate policies without the noise of currency risk.
Diversification Benefit
US and foreign interest rates do not always move together. When the Fed is raising rates and BND declines, the European Central Bank or Bank of Japan may hold rates steady, providing stability from BNDX. This uncorrelated behavior reduces overall portfolio volatility when both are held together.
Practical Allocation
Many advisors recommend a 60-70% BND / 30-40% BNDX split for the bond allocation. If you prefer simplicity, BNDW holds both BND and BNDX in a single global bond fund. At 0.03% for BND and 0.07% for BNDX, the costs are minimal either way. Learn more about building bond allocations in our education center.
