Skip to content When most Aussies think of investing, they imagine shares, property, or maybe even crypto. But for those on the journey to FIRE or already enjoying the perks of semi-retirement, one word becomes increasingly important – INCOME! (and safety)
This is where fixed income ETFs in Australia come into play. These ETFs are designed to provide regular passive income, reduce portfolio volatility and offer diversification away from shares, making them especially useful for anyone building a retirement income strategy or seeking steady yield from their investments. Here’s a quick guide to what I think are worthwhile fixed income ETFs to check out in Australia right now. As always, these are just my personal opinions as I hunt for reliable income in my own portfolio.
DISCLAIMER: Please note that this post is based on my personal analysis and opinion only. This is not financial advice. The content provided here does not constitute professional, personal financial, or financial recommendations. You should conduct your own research and seek independent legal, financial, or taxation advice to understand how the information may apply to your unique circumstances.
Note on Yield: All yields mentioned below refer to running yield or 12-month trailing distribution yield which reflects what investors have been paid recently. These are not yield to maturity figures and can change with interest rate moves or fund rebalancing. These should be accurate as of time of writing this post.
1. Government Bond ETFs – Steady, Safe, and (Honestly) Low-Yield
Realistically, most individual investors won’t touch these directly. Why? The yield often comes in lower than term deposits despite the security of being backed by government. This makes them less attractive unless you’re super cashed up or managing a very large portfolio. In the hunt for higher income, personally I do not want government bond exposure.
That said, here are some options to know about:
| Ticker | ETF Name | Key Features | Yield | MER | AUM (approx) |
|---|---|---|---|---|---|
| VGB | Vanguard Australian Government Bond Index ETF | Pure exposure to Australian government bonds | ~3.01% | 0.16% | $1.08B |
| AGVT | BetaShares Australian Government Bond ETF | Long-duration government bonds and has allocation to supranational organisaitons | ~3.7% | 0.22% | $885M |
| OZBD | BetaShares Australian Composite Bond ETF | Gov-heavy portfolio with some corporates | ~3.94% | 0.19% | $544M |
| BOND | SPDR S&P/ASX Australian Bond ETF | Even more gov focused than OZBD | ~3.26% | 0.24% | $42.5M |
2. Australian Corporate Bonds – Pure Local Plays
This section is for those who want only Aussie exposure (could include global companies issuing in AUD) — no global credit muddying up the scene and no government bonds dragging down the yield. It’s for income-focused investors who are potentially looking for more rewarding return than term deposits.
One key feature to note is the difference between fixed rate bonds and floating rate bonds, and the effect of interest rate set by the RBA on the price of these bonds. Here is a fast rundown, noting I am trying to keep it super simple. Fixed rate offer steady income but comes with interest rate risk — meaning bond prices drop when interest rates rise (longer duration and more sensitive). Conversely if rates drop, these become sought after and prices tend to rise. Floating rate doesn’t have material interest rate risk since it adjusts with the interest rates and typically does not have significant bond price movements. This is a key driver of why the price of bond ETFs fluctuate, plus there is potential to make addition return on top of the income these ETFs pay if you are positioned correctly in the cycles.
| Ticker | ETF Name | Key Features | Yield | MER | AUM (approx) |
|---|---|---|---|---|---|
| PLUS | VanEck Australian Corporate Bond Plus ETF | Mainly invests in highest yielding investment grade corporate bonds issued in Australia | ~4.48% | 0.32% | $368M |
| VACF | Vanguard Australian Corporate Fixed Interest ETF | Pure corporate bond exposure, relative shorter duration | ~4.31% | 0.2% | $682M |
| CRED | BetaShares Australian Investment Grade Corporate Bond ETF | Tilt to higher credit spreads, focus on fixed rate bonds, smaller basket (~50) | ~5.09% | 0.25% | $1.1B |
| IYLD | iShares Yield Plus ETF | Excludes Big 4 banks (if you are worried about excessive exposure), shorter duration | ~4.59% | 0.12% | $59M |
| ICOR | iShares Core Corporate Bond ETF | ESG-screened, investment grade only | ~4.04% | 0.15% | $308M |
| HCRD | BetaShares Interest Rate Hedged Corporate Bond ETF | Fixed rate corporate bonds, with interest rate hedge, holding same as CRED | ~4.82% | 0.29% | $43M |
3. “Bit of Everything” Global Basket – Broad Exposure with Mixed Results
These ETFs offer a blend of global credit and government bonds. They’re great for those wanting diversification beyond Australia — but often include quite a large chunk of government exposure which in turn impacts the yield. If you’re already heavy in Aussie assets, global fixed income gives exposure to different economies and central bank cycles.
| Ticker | ETF Name | Key Features | Yield | MER | AUM (approx) |
|---|---|---|---|---|---|
| VBND | Vanguard Global Aggregate Bond Index (Hedged) ETF | Indexed exposure to global gov + investment grade corp bonds | ~3.29% | 0.20% | $2.6B |
| IHCB | iShares Global Corp Bond ETF (Hedged) | AUD-hedged global investment grade corporate bonds only | ~4.11% | 0.26% | $249M |
| VIF | Vanguard International Fixed Interest Index (Hedged) ETF | Global gov + corp bonds (indexed) outside of Australia | ~2.61% | 0.20% | $868M |
4. Hybrids – Income with Equity-Like Risk
To simply put, hybrids look like bonds but act like shares and are riskier in a crisis. However for the risk entailed, hybrids definitely pay much higher yields (especially with franking credits). The Australian government is already phasing out hybrids, so I personally choose to skip this space.
5. Active Fixed Income ETFs – Leave It to the Pros (or maybe not)?
For those who prefer professional management and credit selection, active fixed income ETFs offer the potential to outperform through market cycles. Typically they would already have the full blend of government, corporate, domestic, global and sometimes high yield (lower credit rating bonds). Just watch the higher fees and transparency tradeoffs (noting also some don’t actually publish yield and the holdings on their sites). Personally, I am not a big fan of active funds but some of the options below definitely do “outperform” their benchmarks.
A few reputable houses which come into mind are:
Macquarie
- MQDB (Dynamic Bond ETF) / MQIO (Income Opportunities Active ETF)
JPMorgan
- JPIE (Income ETF) / JPGB (Global Bond Active ETF)
PIMCO
- PAUS (Australian Bond Active ETF) / PGBF (Global Bond Active ETF) / PCRD (Global Credit Active ETF) / PDFI (Diversified Fixed Interest Active ETF)
Over to You – Did I Miss a Great Fixed Income ETF?
This post covered the top fixed income ETFs in each category in my opinion and worth a look for investors seeking for passive income in Australia. With the phase out of hybrids, more ETFs focused on fixed income will rise up especially in the active managers space. Do let me know if there are any awesome ETFs which I may have missed! Cheers!
