Key Points
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Vanguard Intermediate-Term Corporate Bond ETF offers a significantly higher dividend yield and lower expense ratio than the iShares alternative
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iShares 3-7 Year Treasury Bond ETF has historically experienced lower volatility and a smaller maximum drawdown during market stress
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Vanguard Intermediate-Term Corporate Bond ETF provides exposure to 343 investment-grade corporate issues, while the iShares fund concentrates on 83 government debt securities
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The Vanguard Intermediate-Term Corporate Bond ETF (NASDAQ:VCIT) offers higher yields through corporate credit, while the iShares 3-7 Year Treasury Bond ETF (NASDAQ:IEI) prioritizes lower volatility and government backing.
Investors seeking fixed-income exposure often weigh the stability of government debt against the potentially higher yields of corporate bonds. Both funds target the intermediate portion of the maturity curve, but they differ significantly in credit risk, duration, and cost. This comparison examines how these characteristics impact total returns and portfolio volatility.
Snapshot (cost & size)
MetricVCITIEIIssuerVanguardiSharesShare price$81.81 (as of 2026-07-10)$116.77 (as of 2026-07-10)Expense ratio0.03%0.15%1-yr return (as of 2026-07-10)4.20%2.40%Dividend yield4.90%3.70%Beta0.330.14AUM$68.7 billion$18.2 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 notably more affordable with a 0.03% expense ratio compared to 0.15% for the iShares fund. This cost advantage, combined with the yield premium of corporate credit, leads to a higher overall payout. Investors earn a 1.19% yield advantage with VCIT, though this comes with the added risk of corporate debt.
Performance & risk comparison
MetricVCITIEIMax drawdown (5 yr)(20.60%)(13.90%)Growth of $1,000 over 5 years (total return)$1,047$1,006
What’s inside
The iShares 3-7 Year Treasury Bond ETF (IEI) replicates the performance of an index composed of U.S. Treasury securities with remaining maturities between three and seven years. It holds 83 government-backed bonds, which historically offer lower volatility than corporate debt. The portfolio consists primarily of intermediate-term Treasury notes. The fund was launched in 2007. The iShares 3-7 Year Treasury Bond ETF has paid $4.28 per share over the trailing 12 months, which, at its recent ~$117 share price, yields 3.70%.
The Vanguard Intermediate-Term Corporate Bond ETF (VCIT) tracks the Bloomberg U.S. 5-10 Year Corporate Bond Index, focusing on investment-grade debt issued by industrial, utility, and financial companies. It is more broadly diversified with 343 holdings, and its largest positions are individual corporate issues. This focus on corporate credit typically results in higher sensitivity to economic cycles than government-backed securities. The fund was launched in 2009. The Vanguard Intermediate-Term Corporate Bond ETF has paid $3.96 per share over the trailing 12 months, which, at its recent ~$82 share price, yields 4.90%.
For more guidance on ETF investing, check out the full guide at this link.
Which looks like the better buy
While the Vanguard Intermediate-Term Corporate Bond ETF (VCIT) and the iShares 3-7 Year Treasury Bond ETF (IEI) are both fixed-income exchange-traded funds (ETFs), they differ in many key respects. Those seeking fixed-income exposure would be wise to consider both funds, but should gain a solid understanding of how each operates before selecting one over the other.
Let’s start with Vanguard Intermediate-Term Corporate Bond ETF (VCIT). This fund focuses on corporate credit, meaning it holds corporate bonds issued by many iconic companies that investors already know. Top holdings include bonds issued by Amazon, Boeing, and Pfizer. These companies issue bonds to finance their operations, lower the cost of capital, or to fund mergers or acquisitions. While many of the bonds held by VCIT are issued by companies with very solid balance sheets, corporate bonds do carry credit risk—the potential that the issuer will delay, restructure, or default on its payments. This makes corporate bonds a slightly more risky asset class than, say, Treasury bonds, which are backed by the full faith and credit of the U.S. government. As for performance, VCIT has delivered a total return of 31% over the last 10 years, equating to a compound annual growth rate (CAGR) of 2.7%. Its rock-bottom expense ratio of 0.03% is among the lowest in the fixed-income ETF universe.
Then, there’s IEI. This fund holds U.S. Treasury bonds. As such, it carries less credit risk than VCIT. However, there’s a trade-off. Since Treasuries are inherently more likely to be repaid, they often yield less than corporate issues. This is reflected in the fund’s dividend yield. IEI’s current dividend yield is around 3.7%, while VCIT yields around 4.9%. Turning to performance, IEI has generated a total return of 13% over the last 10 years, with a CAGR of 1.2%. Last, IEI’s expense ratio of 0.15% is affordable, but not as low as VCIT’s.
In summary, VCIT is likely to be the choice for many investors seeking fixed-income exposure. It provides a solid mix of yield, risk, and low costs that will fit most investors’ needs.
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Kris Eddy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Boeing, and Pfizer. The Motley Fool has a disclosure policy.
