Total bond vs Treasuries

BND vs VGIT after taxes

Compare a total US bond fund against an intermediate Treasury fund, including the state-tax treatment of interest.

BND holds the total US investment-grade bond market, mixing government and corporate bonds. VGIT holds intermediate-term US Treasuries only.

Bond interest is taxed as ordinary income each year. Treasury interest is exempt from state and local income tax, while corporate bond interest is fully taxable, so in a taxable account with state tax the Treasury-only fund has a state-level advantage. Run the backtest to compare.

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Historical results

$10,000 invested, 2010-01-04 to 2025-12-31

HoldingPre-tax valuePre-tax CAGRMax drawdownAfter-tax valueAfter-tax CAGR

Total bond (BND)

BND

$15,0672.60%-18.58%$13,4441.87%

Treasuries (VGIT)

VGIT

$14,5492.37%-16.05%$13,3731.83%

Historical results for a $10,000 lump sum with dividends reinvested and monthly rebalancing, as of 2025-12-31. Past performance does not guarantee future results. Not investment advice.

After-tax assumptions: Single filer, $150,000 income, taxable account, HIFO lots, 2026 federal brackets, no state tax.

Run it live with your own dates and tax profile

What you'll see when you run it

  • Bond interest is ordinary income, so account type matters for both funds.
  • The Treasury state-tax exemption is strongest for investors in high-tax states.
  • Compare after-tax income character, not only pre-tax yield.

What this comparison covers

  • Government-plus-corporate exposure in BND versus Treasuries-only in VGIT.
  • Ordinary-income tax treatment of bond interest each year.
  • The state and local income tax exemption on Treasury interest.

FAQ

Why can Treasuries be more tax-friendly than total bond?

Interest from US Treasuries is exempt from state and local income tax. A total bond fund includes corporate bonds whose interest is fully taxable, so a Treasury-only fund can have a state-tax advantage for investors who owe state income tax.

Does account type change the bond comparison?

Yes. Bond interest is taxed as ordinary income each year in a taxable account. In an IRA or Roth there is no yearly tax on interest, so the state-tax distinction between the two funds does not apply.

Run this comparison with your own dates, account type, and tax profile.

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