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How the Largest Bond Funds Did In Q2 2024

Dodge and Cox Income led its category, while PIMCO Income and Met West Total Return fell behind.

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Securities In This Article
Dodge & Cox Income I
Vanguard Interm-Term Tx-Ex Adm
Vanguard Short-Term Bond ETF
JPMorgan Core Bond R6
Metropolitan West Total Return Bd Plan

As inflation news changed for the better in the second quarter of 2024, the largest bond funds eked out small gains, recovering from losses taken as the Federal Reserve scaled back the number of interest rate cuts expected later this year.

The bounce back is “mainly inflation coming down, and thus yields coming down in response,” notes Eric Jacobson, director of manager research, US fixed-income strategies, for Morningstar.

Here’s how the largest mutual and exchange-traded funds fared in the second quarter. Performance data for this article was based on the lowest-cost share class for each fund. Some funds may be listed with share classes not accessible to individual investors outside of retirement plans. The individual investor versions of those funds may carry higher fees, which reduces returns to shareholders.

Largest Active Bond Fund Q2 Performance

Morningstar Category
Q2 Return %
Q2 % Category Rank
1Y Return %
1Y Category Rank
PIMCO IncomePIMIXMultisector Bond0.44747.2458
American Funds Bond Fund of AmericaRBFGXIntermediate Core0.20502.9948
Dodge & Cox IncomeDOXIXIntermediate Core-Plus0.52194.6923
Vanguard Intermediate-Term Tax-ExemptVWIUXMunicipal National Intermediate0.04723.5754
Vanguard Short-Term Investment GradeVFSIXShort-Term Bond0.96676.0554
PIMCO Total ReturnPTTRXIntermediate Core Plus0.38344.3330
Baird Aggregate BondBAGIXIntermedate Core-Plus0.24403.6922
Metropolitan West Total ReturnMWTSXIntermediate Core-Plus0.05822.9341
JPMorgan CoreJCBUXIntermediate Core0.29303.1541
PGIM Total ReturnPTRQXIntermediate Core-Plus0.47235.1017

Nine of the 10 biggest active bond funds performed worse than their average peers in the quarter, with five in the bottom quartile of returns of their respective categories. One fund bucked that trend: the $77 billion Dodge & Cox Income DOXIX, whose 0.52% return landed it in the 19th percentile of the intermediate core-plus category.

“The fund’s portfolio was very well-positioned ahead of the second quarter,” says Mara Dobrescu, global asset class lead for fixed-income strategies for Morningstar. “Its veteran team had modestly increased its exposure to both US duration and Eurozone duration—the latter especially paid off, given recent rate cuts in the Eurozone.” Duration measures how sensitive bond prices are to changes in interest rates.

In addition, Dodge & Cox Income’s managers “continued to reduce the fund’s corporate credit exposure, given what they perceived to be expensive valuations, and conversely, they increased exposure to agency mortgage-backed securities and US Treasuries to serve as ballast at a time of tight credit spreads.” A credit spread is the difference in yields between bonds of different credit quality and duration; a tight spread means the difference is small.

Largest Passive Bond Funds Q2 Performance

Morningstar Category
Q2 Return %
Q2 % Category Rank
1Y Return %
1Y Category Rank
Vanguard Total Bond MarketVTBSXIntermediate Core0.19522.8055
Vanguard Total Bond Market IIVTBNXIntermediate Core0.20502.7161
Vanguard Total International Bond IIVTILXGlobal Bond-US Hedged-0.6874.3870
iShares Core US Aggregate Bond ETFAGGIntermediate Core0.13672.6167
Vanguard Total International Bond ETFBNDXGlobal Bond-USD Hedged-0.62884.4167
Vanguard Short-Term Bond ETFBSVShort-Term Bond0.84844.5990
Vanguard Short-Term Inflation-Protected SecuritiesVTIPXShort-Term Inflation-Protected Bond1.40465.2540
Vanguard Intermediate-Term Corporate Bond ETFVCITCorporate Bond0.43235.6329
Vanguard Short-Term Corporate Bond ETFVCSHShort-Term Bond0.95685.9446
iShares National Municipal Bond ETFMUBMunicipal National Intermediate0.05702.9574

There were fewer standouts and faceplants for index funds, with only one in the top quartile and two in the bottom quartile of their categories. The highest-ranked fund of the group was the $47 billion Vanguard Intermediate-Term Corporate Bond ETF VCIT, which ranked in the 23rd percentile of the corporate bond category.

Lan Anh Tran, a manager research analyst for Morningstar, says that because the Vanguard ETF focuses on intermediate-duration bonds, its duration is somewhat shorter than average for its category. Bond prices and yields move in opposite directions, so as yields have risen slightly, lowering bond prices, the fund’s shorter duration meant it was less affected. Tran adds that they also have somewhat less credit risk, which helps as credit spreads have widened. “They’re having a pretty good time compared to broader category peers right now. The underlying point is that shorter duration and safer credit risk is doing really well in this quarter.”

Largest Active Bond Funds Long-Term Performance

The 2022 spike in inflation and subsequent aggressive Fed rate increases have taken a toll on bond fund returns. Over the past three years, virtually all the biggest funds are down. Over the last five years, the results are more mixed, with only four of the biggest index funds and one of the biggest active funds posting negative annual returns.

Morningstar Medalist Rating
3Y Return %
3Y % Category Rank
5Y Return %
5Y % Category Rank
PIMCO IncomeGold1.12232.6726
American Funds Bond Fund of AmericaGold-2.69250.658
Dodge & Cox Income*Gold-1.3481.476
Vanguard Intermediate-Term Tax-ExemptGold-0.34211.4019
Vanguard Short-Term Investment GradeBronze0.40601.6645
PIMCO Total ReturnSilver-2.79480.2049
Baird Aggregate BondGold-2.73260.2424
Metropolitan West Total ReturnSilver-3.5278-0.1266
JPMorgan CoreGold-2.39180.4214
PGIM Total ReturnGold-2.54350.3341

*Longer-term returns are based on the DODIX share class before May 2, 2022, when it launched.

The active fund ranked highest in its category was Dodge and Cox Income, which landed in the 8th percentile of the intermediate core-plus category over the last three years and the 6th percentile over the past five. The fund that performed best was the $152 billion PIMCO Income PIMIX, whose 1.12% annualized performance over the past three years and 2.67% over the last five beat all comers.

Largest Passive Bond Funds Long-Term Performance

Morningstar Medalist Rating
3Y Return %
3Y % Category Rank
5Y Return %
5Y % Category Rank
Vanguard Total Bond MarketGold-2.9738-0.1646
Vanguard Total Bond Market IIGold-3.0041-0.2556
Vanguard Total International Bond IIBronze-2.0352N/AN/A
iShares Core US Aggregate Bond ETFGold-3.0244-0.2657
Vanguard Total International Bond ETFSilver-1.97480.37%74
Vanguard Short-Term Bond ETFSilver-0.23860.9980
Vanguard Short-Term Inflation-Protected SecuritiesSilver2.03313.0348
Vanguard Intermediate-Term Corporate Bond ETFGold-2.26270.9731
Vanguard Short-Term Corporate Bond ETFGold0.36631.6743
iShares National Municipal Bond ETFSilver-0.70461.1345

The passive fund ranked highest in its category was the $46 billion Vanguard Intermediate-Term Corporate Bond ETF VCIT, which was in the 27th percentile of the US fund corporate bond category over the past three years and the 31st percentile over the past five—the highest-ranking of the biggest funds over both periods. Performance-wise, the standout was the Vanguard Short-Term Inflation-Protected Security Index VTIPX, which had a 2.03% annualized total return over the past three years and a 3.03% annualized return over the past five.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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