1. What Happened
Vanguard’s Intermediate-Term Corporate Bond ETF (VCIT) continues to attract strong investor interest in 2025 as rising interest rates and market volatility prompt a shift toward high-quality fixed income. As of June 30, 2025, VCIT delivered a year-to-date total return of approximately 5.3% (market price and NAV), outperforming the broader corporate bond Morningstar category average of 4.2%.
The Federal Reserve’s recent rate hike to 5.25% has increased uncertainty in equity markets, driving investors to seek income and diversification through intermediate-term corporate bonds. VCIT tracks the Bloomberg U.S. 5–10 Year Corporate Bond Index, which includes investment-grade corporate bonds with maturities between 5 and 10 years.
2. ETF Market Analysis & Economic Outlook
The U.S. economy remains resilient, with Q2 2025 GDP growth revised upward to approximately 2.1%, supported by robust consumer spending and business investment. Inflation persists at around 3.8%, keeping the Fed on a hawkish path.
VCIT’s portfolio primarily consists of investment-grade corporate bonds with an average duration of about 6.1 years, slightly shorter than the category average of 6.5 years. This moderate duration helps mitigate interest rate risk while capturing attractive yields. The fund’s credit quality is notable, with over 40% of assets in A-rated bonds—about 10 percentage points higher than the category average—while maintaining over half the portfolio in BBB-rated bonds, aligning with peers.