BIV ETF

As the yield curve steepens and expectations for interest rate cuts grow, the bond market can be challenging to understand. However, here are three Vanguard bond funds that you might want to look into.

If you're retired and want to simplify your life, think about making a basic investment in these two income ETFs.

The yield curve is beginning to steepen once more, which allows fixed income investors to think about long-term debt again. However, if the risk of investing too far along the yield curve feels too high, it might be wise to look at intermediate bond options instead.

The uncertainty in the current market is heightened by concerns about the economy possibly being in a recession, an upcoming presidential election, and fluctuating interest rates. Because of this, investors in fixed income might consider a balanced strategy by choosing bonds with medium-term maturity dates.

BIV is an index fund that focuses on intermediate-term bonds, featuring a moderate duration, a high-quality portfolio, and low fees. Since January 2022, BIV shares have dropped by almost 12%. However, with corporate bond yields reaching their highest levels in more than ten years and the interest rate cycle likely at its peak, the future looks more promising for BIV and similar funds.

With a forthcoming election paired with the expectation of rate cuts, the bond market could see volatility in the second half of 2024. That said, investors may want to opt for a middle-ground solution for yield and rate risk with intermediate-term bond funds.

Data from a Morningstar report noted that May saw strong inflows for taxable bond funds, confirming the broader trend of bond funds seeing heightened interest within the past year.

For investment-grade bond funds, fixed income investors may need to examine the holdings closely to determine if they are truly investment-grade. Vanguard offers three ETFs that meet this standard.

Investors appear to be taking a Goldilocks-like approach to bonds — not too short and not too long. According to a Reuters report, investors have been opting for intermediate term-bonds funds of the Treasury variety as uncertainty over the U.S. Federal Reserve's policy looms.