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Vanguard Long-Term Corporate Bond ETF highlights duration risk
The Vanguard Long-Term Corporate Bond ETF, VCLT, has an average duration of about 12.2 years, implying a 1% rate hike could translate into roughly a 12% price decline in a simplified scenario.
A Yahoo Finance piece comparing two long-term Vanguard bond ETFs, VCLT and VGLT, focuses on how investors should weigh the two main risks in fixed income: credit risk and interest rate risk, with the latter typically dominating for long-duration bonds.
The article says the Vanguard Long-Term Corporate Bond ETF (VCLT) has $8.4 billion in assets and a 30-day SEC yield of nearly 6%, while about 56% of its 2,778 holdings are rated AA or A, positioning the fund as investment grade and keeping credit risk relatively contained.
However, the article emphasizes that VCLT is a long-duration ETF, citing an average holding duration of 12.2 years. In a hypothetical scenario where the Federal Reserve raises rates by 1% over multiple meetings and no cuts offset the increases, the piece notes that a 12-year duration bond could fall about 12% in value.
The writeup frames the comparison as a reminder that long-term, rate-sensitive bond funds can move sharply when interest rates rise, even when credit quality is relatively strong.