The March issue of our Bond Fund Intelligence, which will be sent to subscribers Friday a.m., features the articles, "Vanguard Examines Bond Index Funds and Tracking," which reviews a paper on the challenges of managing funds to an index; and "Invesco Launches Four More Bond ETFs: Flex, MBS, Hybrid," which covers the launch of several new fixed income ETFs. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund returns jumped again while yields were mixed in February. We excerpt from the new issue below. (Contact us if you'd like to see our latest Bond Fund Intelligence and BFI XLS spreadsheet, or our Bond Fund Portfolio Holdings data, and join us next week for our upcoming Bond Fund Symposium, which is March 19-20 in Boston, Mass.)
BFI's lead article states, "Vanguard writes that, 'The right tools can help bond index funds stay on track.' The paper explains, 'An index fund is designed to capture the risk and return of an appropriate benchmark. While achieving that sounds easy, it requires a sophisticated approach. The challenges are amplified for bond index fund managers because of the breadth and liquidity features of bond markets. This research explores how bond index fund managers, amid uncertain and dynamic markets, navigate complexity and volatility to keep portfolios closely aligned with their benchmarks while remaining agile enough to seize opportunities.'"
It continues, "The paper states, 'Equity index fund managers typically achieve tight benchmark tracking by owning all index securities in their proportional weights. For bond index fund managers, this is generally impractical because the bond market is so large -- the Bloomberg U.S. Aggregate Bond Index contained nearly 14,000 securities as of September 2025 -- and many bonds trade with limited liquidity.'"
Our "Invesco" article states, "A release, 'Invesco Advances Its Fixed Income ETF Lineup with Launch of Four New Funds,' tells us, 'Invesco Ltd. (IVZ), a leading global asset management firm, announced ... the launch of four fixed income ETFs that further strengthen the firm's long-standing fixed income ETF lineup. These new ETFs are designed to help investors address some of the current investment challenges including persistent interest-rate uncertainty, the need for diversified income, and a means to manage risk across changing market conditions.'"
The piece continues, "It explains, 'The four ETFs launched today by Invesco include: Invesco Flexible Income ETF (FLXI), Invesco Agency MBS ETF (IMTG), Invesco MSCI Treasury Duration Rotation ETF (TROT) and Invesco U.S. Hybrid Bond ETF (HBRD).'"
Our first News brief, "Returns Jump Again, Yields Mixed in Feb," states, "Bond fund returns were higher once more in February while yields were mixed. Our BFI Total Index rose 0.92% over 1-month and rose 5.83% over 12 months. (Money funds rose 4.02% over 1-year as measured by our Crane 100 Index.) The BFI 100 increased 1.15% in Feb. and rose 6.38% over 12 mos. Our BFI Conservative Ultra-Short Index was up 0.34% over 1-month and 4.61% for 1-year; Ultra-Shorts rose 0.30% and 4.64%. Short-Term gained 0.52% and 5.43%, and Intm-Term rose 1.46% in Feb. and 6.70% over 12 mos. BFI's Long-Term Index was up 1.64% and up 6.25%. High Yield returned 0.10% in February and 6.28% over 12 months."
A second News brief, "Morningstar on 'Why This Municipal-Bond Fund Is a Topnotch Offering.' They state, 'Vanguard Intermediate-Term Tax-Exempt (VWIUX) combines experienced leadership with a disciplined approach that stands out and delivers consistently strong results versus muni-national intermediate Morningstar Category peers. Deep muni market experience underpins the team’s stability and consistency. Industry veteran James D’Arcy has led this portfolio since 2013 and has contributed to the firm’s municipal franchise since 2011. The firm added Mathew Kiselak to the portfolio in late 2023 to bolster the management team’s depth.'"
Another brief says, "'State Street Investment Management Expands Industry’s First Actively Managed Corporate Target Maturity ETFs Suite,' says a press release. It explains, 'State Street Investment Management announced ... the launch of five actively managed target maturity high yield corporate bond ETFs. In providing access to high yield bonds with matching maturity years ranging from 2027 to 2031, the newest State Street MyIncome ETFs help simplify the process of building custom bond ladder portfolios.'"
A BFI sidebar, "MStar: Intm Core Bond Funds," says, "Morningstar writes on '8 Top-Performing Intermediate Core Bond Funds.' They explain, 'Intermediate core bond funds often form the backbone of investors' fixed-income portfolios. Morningstar analysts have given the following eight funds their high-conviction Morningstar Medalist Ratings, meaning they believe the funds will continue to outperform their peers. To screen for the top-performing funds in this category, we looked for those with the best returns over the last one-, three-, and five-year periods.'"
Finally, another sidebar, "NY Fed on Corporate Risk," states, "The Federal Reserve Bank of New York's Liberty Street Economics blog writes on 'Estimating the Term Structure of Corporate Bond Risk Premia.' It says, 'Understanding how short- and long-term assets are priced is one of the fundamental questions in finance. The term structure of risk premia allows us to perform net present value calculations, test asset pricing models, and potentially explain the sources of many cross-sectional asset pricing anomalies. In this post, I construct a forward-looking estimate of the term structure of risk premia in the corporate bond market following Jankauskas (2024). The U.S. corporate bond market is an ideal laboratory for studying the relationship between risk premia and maturity because of its large size (standing at roughly $16 trillion as of the end of 2024) and because the maturities are well defined.'"
