BND tracks the Bloomberg US Aggregate Float Adjusted Index, which covers US investment-grade government, corporate and mortgage-backed bonds across short, intermediate and long maturities. The portfolio has large allocations to US Treasuries and government agency securities, with the rest in investment-grade corporate bonds and mortgage-backed securities. Average duration is around six years, so a one percentage point rise in interest rates would be expected to lower the fund price by roughly six percent, and a fall in rates would raise it by a similar amount. Bonds have often risen when stocks fall during recessions, but 2022 showed that both can decline together when inflation forces central banks to raise rates quickly. BND is commonly used as the core fixed income holding in diversified portfolios.
