Vanguard Announces Treasury-Only Policy for Several Government Bond Funds, ETFs

The fund giant says the change will provide investors more flexibility in managing risks and returns plus narrower bid-ask spreads for these ETFs

(Photo: AP) (Photo: AP)

Vanguard is changing the mix of investments in three government bond funds and their ETF counterparts, moving away from agency debt and solely into Treasuries, starting in the fourth quarter.

(Related: Vanguard Puts Rival Firms on Notice: Fee Wars Will Only Heat Up)

The funds affected are the Vanguard Short-Term Government Bond Index Fund and ETF (VSBSX and VGSH), Vanguard Intermediate-Term Government Bond Index Fund and ETF (VSIGX/VGIT) and Vanguard Long-Term Government Bond Index Fund and ETF (VLGSX and VGLT).

(Related: Vanguard Proposes Fund-Advisor Changes)

Vanguard will accomplish the move by changing the benchmark index for each of the funds from the Bloomberg Barclays U.S. Government Float-Adjusted index to the Bloomberg Barclays U.S. Treasury Float-Adjusted index, and renaming the funds to reflect that move.


“Following the transition, the funds will offer investors pure exposure to discrete segments of the U.S. Treasury market and provide them the flexibility to tailor their bond portfolios to reflect their risk and return objectives,” said Greg Davis, Vanguard’s chief investment officer, in a statement.

“In addition, with the greater liquidity in the Treasury market, we expect that the bid-ask spreads on the funds’ ETF shares will be considerably lower,” said Davis.

Vanguard says the revamped funds can be used to complement existing actively managed bond funds. 

The mutual fund giant offers advisors, institutions, and individual investors a choice of index or active options in a range of maturities covering the corporate and U.S. Treasury market, including short-, intermediate-, and long-term active and index corporate credit funds, in addition to a series of active U.S. Treasury funds.

--- Check out Vanguard Puts Rival Firms on Notice: Fee Wars Will Only Heat Up on ThinkAdvisor.

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