We researched intermediate-term bond ETFs and narrowed down to three funds with the best performance through December 31, 2021. Learn more about these ETFs' returns, expenses, holdings, and quant ratings.
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Intermediate-Term Bond ETF: What It Is and How It Works
An intermediate-term bond ETF is an exchange-traded fund that invests in fixed-income securities with durations that generally range between five and ten years. These bond ETFs typically track the performance of an index, such as the Bloomberg Barclays US Aggregate Bond Index.
Other than intermediate-term, bond funds may also be categorized as short-term or long-term. There are many other types of bond ETFs, including those that invest in municipal bonds, U.S. Treasury bonds, corporate bonds, agency bonds, high-yield bonds, inflation-protected securities (TIPS), and certain mortgage-backed securities.
Investors may hold a bond ETF for reasons such as interest income or as a diversification tool to be used in combination with other investments, such as stocks or other ETFs. Investors may prefer intermediate-term bond ETFs over long-term bond ETFs when interest rates are expected to rise. This is because bond prices have an inverse relationship with interest rates, and bonds with shorter durations are less sensitive to rate changes. Likewise, investors may prefer intermediate-term bond ETFs over short-term bond ETFs when interest rates are expected to fall. This is because bond prices have an inverse relationship with interest rates, and bonds with longer durations are more sensitive to rate changes.
Important: Although these two terms are related, a bond's duration is different than its maturity. Duration is a measure of a bond's price sensitivity to interest rates, whereas a bond's maturity is a measure of years until the bond's principal is due.
Check out our list of bond ETFs.
Evaluating an Intermediate-Term Bond ETF
Investors can research and analyze intermediate-term bond ETFs with an ETF screener. To use the Seeking Alpha screener to find these ETFs, investors can select the "Taxable Bond" asset class, then select "Intermediate Core Bond" or "Intermediate Core-Plus Bond" or "Intermediate Government" for the sub-class.
The criteria used for choosing the best-performing intermediate-term bond ETFs are:
- Performance: 1-year return is the primary selection criteria for evaluating the performance of our featured intermediate-term bond ETFs. However, investors are wise to do further review of longer periods, such as 3-, 5-, and 10-year returns, before choosing an ETF for their portfolio.
- Expenses: Low expenses, as measured by the fund's expense ratio, can be an important measurement for ETFs. This is because, when ETFs track the same index, the one with the lowest expense ratio will generally outperform.
- Objective: Only ETFs that primarily hold bonds with maturity or duration of five to ten years were considered. The ETFs may be actively or passively managed. Alternative objectives and strategies, such as inverse ETFs and leveraged ETFs, were ignored for this list.
- Portfolio holdings: Intermediate-term bond ETFs typically hold bonds with durations between five and ten years. Bond ETF holdings may also include a range of bond sub-classes, such as government bonds, corporate bonds and mortgage-related debt.
- Quant Ratings and Factor Grades: Seeking Alpha's Quant Ratings and Factor Grades can be used for evaluating stocks or ETFs. In this article, we share what are called, "Factor Grades," which provide letter grades for five "factors" - Momentum, Expenses, Dividends, Risk, and Asset Flows. To do this, Seeking Alpha compares the relevant metrics for the factor to the same metrics for the other ETFs in its asset class. The factor grades range from a high of A+ to a low of F.
3 Best-Performing Intermediate Bond ETFs
| ETFs | 1-Year Performance |
| Invesco Total Return Bond ETF | 0.47% |
| Fidelity Total Bond ETF | -0.43% |
| WisdomTree Mortgage Plus Bond ETF | -0.56% |
1. Invesco Total Return Bond ETF
Invesco Total Return Bond ETF (GTO) is an actively-managed exchange-traded fund that holds a diversified blend of short-, intermediate- and long-term bonds, which in combination have an average effective duration of 6.30 years. The Fund will invest at least 80% of its total assets in fixed-income instruments of varying maturities and credit qualities.
- As of date: December 31, 2021
- 1-year Performance (price): 0.47%
- Expense Ratio: 0.50%, or $50 annually for every $10,000 invested
- 30-Day SEC Yield: 2.29
- Average Daily Volume: 193,413
Invesco Total Return Bond ETF Performance
| 1-Yr Return | 3-Yr Return | 5-Yr Return | 10-Yr Return | |
| Invesco Total Return Bond ETF | 0.47% | 7.15% | 5.71% | NA |
| Bloomberg US Aggregate Bond Index | -1.54% | 4.79% | 3.57% | 2.90% |
Invesco Total Return Bond ETF significantly outperformed the Bloomberg US Aggregate Bond Index for the 1-, 3- and 5-year returns, as of December 31, 2021. The fund's outperformance can be partially attributed to the fact that GTO is actively-managed, meaning that the fund manager can use discretion to invest outside the index to seek higher returns.
Investors should note that actively-managed portfolios may be at risk of significantly underperforming the benchmark.
A $10,000 investment in GTO, made 1 year and 3 years ago, would be worth (as of December 31, 2021):
- 1 year ago: $10,047
- 3 years ago: $12,302
GTO Structure, Objective, and Holdings
- Inception Date: 02/10/2016
- Issuer: Invesco Capital Management
- Ticker: GTB
- Primary Exchange: NYSE Arca
- Structure: Open-End Fund
- Objective: Seeks current income and total return.
- Holdings: Invests at least 80% of its total assets in fixed income instruments of varying maturities and credit qualities. The total number of holdings is 787.
Invesco Total Return Bond ETF Seeking Alpha Quant Ratings
| Momentum | Expenses | Dividends | Risk | Asset Flows |
| C- | D | D+ | B- | A |
2. Fidelity Total Bond ETF
Fidelity Total Bond ETF (FBND) is an actively-managed exchange-traded fund that seeks to provide a high level of current income. FBND normally invests at least 80% of its assets in debt securities of all types, including varying maturities and credit quality. The average duration for the holdings in FBND is 6.08 years.
- As of date: December 31, 2021
- 1-year Performance (price): -0.43%
- Expense Ratio: 0.36%, or $36 annually for every $10,000 invested
- 30-Day SEC Yield: 1.65
- Average Daily Volume: 286,833
Fidelity Total Bond ETF Performance
| 1-Yr Return | 3-Yr Return | 5-Yr Return | 10-Yr Return | |
| Fidelity Total Bond ETF | -0.43% | 6.16% | 4.25% | NA |
| Bloomberg US Aggregate Bond Index | -1.54% | 4.795 | 3.57% | 2.90% |
Fidelity Total Bond ETF outperformed the Bloomberg US Aggregate Bond Index for the 1-, 3- and 5-year market price returns, as of December 31, 2021. Since FBND is actively-managed, its ability to invest outside the index can at times be advantageous and produce superior returns. However, actively-managed funds can underperform a benchmark.
A $10,000 investment in FBND, made 1 year and 3 years ago, would be worth (as of December 31, 2021)::
- 1 year ago: $9,957
- 3 years ago: $11,964
FBND Structure, Objective, and Holdings
- Inception Date: 02/07/2019
- Issuer: Fidelity Management & Research Company
- Ticker: FBND
- Primary Exchange: NYSE Arca
- Structure: Open-End Investment Company
- Objective: Seeks to provide a high level of current income. The fund normally invests at least 80% of its assets in debt securities of all types and repurchase agreements for those securities.
- Holdings: FBND normally invests at least 80% of its assets in debt securities of all types and repurchase agreements for those securities. The total number of holdings for FBND is 1,370.
Fidelity Total Bond ETF Seeking Alpha Quant Ratings
| Momentum | Expenses | Dividends | Risk | Asset Flows |
| C | C- | D+ | B+ | B- |
3. WisdomTree Mortgage Plus Bond ETF
WisdomTree Mortgage Plus Bond ETF (MTGP) is an actively-managed exchange-traded fund that seeks income and capital appreciation through investments in mortgage-backed securities, which allow investors to benefit from the mortgage business without being direct owners themselves.
- As of date: December 31, 2021
- 1-year Performance (price): -0.56%
- Expense Ratio: 0.29%, or $29 annually for every $10,000 invested
- 30-Day SEC Yield: 1.67
- Average Daily Volume: 2,349
WisdomTree Mortgage Plus Bond ETF Performance
| 1-Yr Return | 3-Yr Return | 5-Yr Return | 10-Yr Return | |
| WisdomTree Mortgage Plus Bond ETF | -0.56% | NA | NA | NA |
| Bloomberg U.S. Securitized MBS/ABS/CMBS Index | -1.04% | NA | NA | NA |
| Bloomberg US Aggregate Bond Index | -1.54% | 4.79% | 3.57% | 2.90% |
WisdomTree Mortgage Plus Bond ETF outperformed its chosen target index, the Bloomberg U.S. Securitized MBS/ABS/CMBS Index, as well as the broader bond market index, the Bloomberg US Aggregate Bond Index. The fund's active management style is the reason for recent outperformance.
Investors should keep in mind that an active management style is not always superior to passive management. Also, MTGP has limited performance history and one year of performance is not an indication of future, longer-term performance.
A one-year, $10,000 investment in MTGP would be worth $9,944, as of December 31, 2021.
Structure, Objective, and Holdings
- Inception Date: 11/12/2019
- Issuer: WisdomTree Asset Management
- Ticker: MTGP
- Primary Exchange: NYSE Arca
- Structure: Open-End Investment Company
- Objective: Seeks income and capital appreciation.
- Holdings: Invests primarily in mortgage-backed securities. The total number of holdings for MTGP is 130.
WisdomTree Mortgage Plus Bond ETF Seeking Alpha Quant Ratings
| Momentum | Expenses | Dividends | Risk | Asset Flows |
| A- | D+ | D | C+ | C- |
Bottom Line
Intermediate-term bond ETFs invest primarily in bonds with maturities ranging between five to ten years. But many of these fixed-income security funds invest in a wide range of bond types, from short-term to long-term bonds to achieve an average intermediate-term duration. Investors should keep in mind that bond ETFs may carry some of the same risks as individual bonds, such as credit risk, interest rate risk, and market risk.