Vanguard Total International Bond ETF

BNDX

Market cap $72.8B

U.S. bonds are outperforming after years of volatility, with 10-year Treasury yields falling as inflation pressures moderate even with some prices still elevated.

In the World Series of ETF inflows, the Vanguard S&P 500 ETF (VOO) could do what the Los Angeles Dodgers just did in professional baseball: go back to back with another $100 billion in inflows for a second consecutive year.

Ohio-based Prosperity Capital bought 381,763 shares of BNDX for an estimated $18.9 million in the third quarter. The transaction marked a new position for Prosperity, which didn't report BNDX holdings in the second quarter.

As noted by TMX VettaFi Head of Research Todd Rosenbluth, fixed income ETFs are having a banner year amid record inflows. The Vanguard Total Bond Market ETF (BND) and Vanguard Total International Bond ETF (BNDX) were two of the top funds responsible for the $325 billion in net inflows (as of October 15).

Connecticut-based wealth manager Apella Capital reported selling 219,555 shares of the Vanguard Total International Bond ETF (BNDX) for an estimated $10.8 million in the third quarter.

With $1.01 trillion of net inflows for the year, ETFs are sure to break the 2024 record of $1.1 trillion, likely in November. However, with $325 billion of new money as of October 15, fixed income ETFs have already hit a new milestone for the year.

Unconventional approaches still lead to good results.

The first interest rate cut of the year put fixed income investors on notice that the high-rate, high-yield environment they've been accustomed to is beginning to change. With that, emerging market (EM) bonds may be an option to consider when looking to diversify income and/or maximize yield potential.

IAGG and BNDX are top international bond ETFs for U.S. investors, both offering currency-hedged exposure to investment-grade debt outside the U.S. IAGG has modestly outperformed BNDX over the past three years, seemingly due to heavier sovereign exposure, full index replication, and tighter tracking. With the Fed now easing, domestic bond funds like BND may be better positioned for near-term gains than IAGG or BNDX.

As fund flows during the month of July indicated, more investors continue to head overseas in order to get international bond exposure according to data from Morningstar. For those looking to overcome their U.S. bond home country biases, Vanguard has three funds that are worthy of consideration.