Best Bond ETF in Australia (2026)
Bond ETFs give you a steady income and usually hold up better than shares when markets fall. The main choice is between fixed-rate bonds and floating-rate funds.
It depends on the job you need the ETF to do. Here are the biggest and cheapest in each group:
- Australian fixed-rate bonds: VAF is the largest ($3.9bn) and also the cheapest (0.10% a year).
- Floating rate and corporate: SUBD is the largest ($4.0bn) and QPON the cheapest (0.22% a year).
- Global bonds (hedged): VBND is the largest ($4.9bn) and also the cheapest (0.20% a year).
Data to 30 September 2026 from the TMX Australia funds report. Returns include distributions. Yields are distributions over the past 12 months, adjusted down where they included one-off capital gains. General information only, not a recommendation.
All the options compared
Australian fixed-rate bonds
Prices rise when interest rates fall, and fall when rates rise.
| Code | ETF | Fee | Size | Yield | 1Y | 5Y a year | Spread |
|---|---|---|---|---|---|---|---|
| VAF | Vanguard Australian Fixed Interest Index ETF | 0.10% | $3.9bn | 3.2% | −0.4% | −0.1% | 0.04% |
| IAF | iShares Core Composite Bond ETF | 0.10% | $3.7bn | 3.2% | −0.4% | −0.2% | 0.02% |
| ILB | iShares Government Inflation ETF | 0.18% | $1.6bn | 1.6% | −0.4% | +0.3% | 0.05% |
| VGB | Vanguard Australian Government Bond Index ETF | 0.16% | $1.4bn | 3.3% | −0.7% | −0.5% | 0.04% |
| GOVT | State Street SPDR S&P/ASX iBoxx Australian Government Bond ETF | 0.10% | $145m | 3.1% | −0.7% | −0.9% | 0.11% |
Floating rate and corporate
Income moves with interest rates, so prices are more stable.
| Code | ETF | Fee | Size | Yield | 1Y | 5Y a year | Spread |
|---|---|---|---|---|---|---|---|
| SUBD | VanEck Australian Subordinated Debt ETF | 0.29% | $4.0bn | 5.4% | +5.1% | +4.2% | 0.05% |
| QPON | Betashares Australian Bank Senior Floating Rate Bond ETF | 0.22% | $2.4bn | 4.4% | +4.6% | +3.8% | 0.04% |
| CRED | Betashares Australian Investment Grade Corporate Bond ETF | 0.25% | $1.9bn | 5.6% | −1.2% | +0.5% | 0.07% |
| FLOT | VanEck Australian Floating Rate ETF | 0.22% | $1.3bn | 4.5% | +4.3% | +3.5% | 0.05% |
Global bonds (hedged)
| Code | ETF | Fee | Size | Yield | 1Y | 5Y a year | Spread |
|---|---|---|---|---|---|---|---|
| VBND | Vanguard Global Aggregate Bond Index (Hedged) ETF | 0.20% | $4.9bn | 3.5% | −1.2% | −1.3% | 0.04% |
| VIF | Vanguard International Fixed Interest Index (Hedged) ETF | 0.20% | $862m | 3.0% | −1.7% | −1.5% | 0.07% |
Compare the biggest side by side → · Check how much they overlap →
Spread is the average gap between the buy and sell price: lower is cheaper to trade. 5Y a year is the average yearly total return over five years. Past performance is not a reliable indicator of future performance.
How closely each bond ETF tracks its index
An index fund should return its index, less its fee. The gap below is each fund's return after fees minus its own benchmark. A gap close to zero means it has done its job well. Over 5 years, CRED tracked its index most closely, trailing it by only 0.07% a year.
| ETF and benchmark | Fee | 1Y gap | 3Y gap a year | 5Y gap a year | Verdict |
|---|---|---|---|---|---|
| CREDSolactive Australian Investment Grade Corporate Bond Select Index | 0.25% | -0.12% | -0.04% | -0.07% | Tracking well |
| VAFBloomberg AusBond Composite 0+ Yr Index | 0.10% | -0.08% | -0.08% | -0.09% | Tracking well |
| IAFBloomberg AusBond Composite 0+ Yr Index | 0.10% | -0.08% | -0.08% | -0.10% | Tracking well |
| QPONSolactive Australian Bank Senior Floating Rate Bond Index | 0.22% | -0.12% | -0.13% | -0.10% | Tracking well |
| VBNDBloomberg Global Aggregate Float-Adjusted and Scaled Index (AUD hedged) | 0.20% | -0.17% | -0.18% | -0.14% | Tracking well |
| VGBBloomberg AusBond Government 0+ Yr Index | 0.16% | -0.14% | -0.15% | -0.15% | Tracking well |
| VIFBloomberg Global Treasury Scaled Index (AUD hedged) | 0.20% | -0.18% | -0.19% | -0.15% | Tracking well |
| GOVTS&P/ASX iBoxx Australian & State Governments 0+ Index | 0.10% | -0.10% | -0.10% | -0.16% | Tracking well |
| ILBBloomberg AusBond Inflation Government 0+ Yr Index | 0.18% | -0.16% | -0.18% | -0.19% | Tracking well |
| SUBDiBoxx AUD Investment Grade Subordinated Debt Index | 0.29% | -0.31% | -0.30% | -0.32% | Tracking well |
Gap = fund return after fees minus its benchmark. Issuer figures to October 2026. Hedged funds are measured against the hedged version of their index. Funds without published benchmark figures are left out. See every ETF vs its benchmark →
What to consider
- Know what you own. Fixed-rate bond funds can fall when rates rise, as in 2022.
- Floating-rate funds act more like a higher-yielding cash fund.
- Credit risk. Corporate and subordinated debt pay more because they carry more risk than government bonds.
