VGLT vs. LQD: How Much Are You Willing to Pay for Safety in Today's Bond Market?
Key Points
Vanguard Long-Term Treasury ETF offers a significantly lower expense ratio than iShares iBoxx $ Investment Grade Corporate Bond ETF.
Both funds reported an identical dividend yield of 4.60% as of June 3, 2026.
The iShares iBoxx $ Investment Grade Corporate Bond ETF has shown lower historical volatility with a maximum drawdown of 24.90% over the last five years.
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The Vanguard Long-Term Treasury ETF (NASDAQ:VGLT) provides a low-cost way to access long-dated government debt, while the iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEMKT:LQD) offers exposure to high-quality corporate credit.
Fixed-income investors may choose between government and corporate bonds to balance yield and risk. While VGLT focuses on long-term U.S. Treasuries, LQD tracks investment-grade corporate bonds. This comparison analyzes how their different credit exposures and cost structures influence total returns and portfolio risk.
Snapshot (cost & size)
| Metric | LQD | VGLT |
|---|---|---|
| Issuer | iShares | Vanguard |
| Expense ratio | 0.14% | 0.03% |
| 1-yr return (as of June 3, 2026) | 6.10% | 5.20% |
| Dividend yield | 4.60% | 4.60% |
| Beta | 0.44 | 0.49 |
| AUM | $29.9 billion | $14.3 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
The Vanguard fund is the more affordable option, featuring an expense ratio of 0.03% compared to 0.14% for the iShares fund. Both ETFs provided a 4.60% trailing-12-month dividend yield as of June 3, 2026.
Performance & risk comparison
| Metric | LQD | VGLT |
|---|---|---|
| Max drawdown (5 yr) | (24.90%) | (41.00%) |
| Growth of $1,000 over 5 years (total return) | $998 | $761 |
What's inside
Vanguard Long-Term Treasury ETF (NASDAQ:VGLT) is a fixed-income fund that primarily holds U.S. Treasury bonds with average maturities between 10 and 25 years. The fund launched in 2009 and has paid $2.51 per share over the trailing 12 months.
The iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEMKT:LQD) targets U.S. dollar-denominated, investment-grade corporate debt. Launched in 2002, the fund has a trailing-12-month dividend of $4.96 per share. This corporate-focused profile introduces different credit risks compared to the government-backed Treasury bonds held by the Vanguard fund.
For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
Every fixed income investor eventually confronts the same question: How much are you willing to pay for safety? VGLT answers that with pure U.S. Treasury bonds, zero credit risk, and a fee so low it barely registers. LQD gives you around 3,000 investment-grade corporate bonds from major institutions and companies, a higher yield, and a small but real credit risk that Treasuries simply do not carry.
The current bond market makes this choice more interesting than usual. Credit spreads (the extra yield corporate bonds pay above Treasuries) sit near historic lows, meaning investors are receiving relatively little additional compensation for taking on corporate credit risk right now. If economic conditions weaken and spreads widen, LQD would face pressure that VGLT would not.
VGLT's extreme sensitivity to interest rates means it can surge when rates fall and lose significant value when they rise. LQD's shorter average duration softens that effect. For investors who want bonds to act as genuine protection against economic stress, VGLT's government-only structure is worth the lower yield. Those prioritizing income from high-quality corporate debt at a reasonable cost should choose LQD.
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Sara Appino has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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