The Best Bond Funds in 2026
These bond ETFs and mutual funds earn Morningstar’s top rating.
The US bond market is having a tough 2026: The Morningstar US Core Bond Index is down slightly for the year-to-date through July 31. Inflation and higher-for-longer interest rates are taking a toll on fixed-income performance this year.
“But bonds have diversified equity market volatility,” confirms Morningstar indexes strategist Dan Lefkovitz. “When the Morningstar US Total Market Index has declined this year—on artificial intelligence sentiment shifts or the Iran war—bonds have either gained or suffered far milder losses. They have earned their reputation as ‘ballast,’ significantly reducing portfolio volatility.”
Are Bond Funds a Good Investment?
Investors rely on bonds for many reasons: funding short-term goals, diversifying a stock-heavy portfolio, or generating income during retirement, to name a few. Before choosing a bond mutual fund or exchange-traded fund, step back and consider why you need one: What role will a bond fund play for you?
Once you know the need it’s fulfilling, figure out whether a taxable-bond fund or municipal-bond fund is a better choice for you. If you’re investing via a tax-deferred account like an IRA or 401(k), a taxable-bond fund will be the better match. If you’re investing in a taxable account, a fund that buys municipal bonds might be the better choice on an aftertax basis.
Morningstar portfolio strategist Amy Arnott suggests in her Role in Portfolio framework that investors stick with short- and intermediate-term bond funds as core holdings in their portfolios. Bond funds that focus exclusively on certain other types of securities—such as corporate bonds, international bonds, long-term bonds, high-yield bonds, and so on—should play more limited roles in a portfolio.
A good place to start your search for the best bond funds to buy—both taxable and municipal alike—is with the
The Best Bond Funds to Buy
More than 100 ETFs and mutual funds land in one of Morningstar’s bond fund categories and have at least one share class that earns our top Medalist Rating of Gold with 100% analyst coverage as of July 31, 2026.
The list of the best bond funds covers a hodgepodge of investment styles. It includes bond funds focusing on fixed-income securities with different maturities and credit qualities and features both taxable-bond funds and municipal-bond funds. It encompasses the best bond index funds and the best actively managed options, too.
Here’s a sampling of just a few of the top-rated bond funds broken down by various fixed-income groups. Morningstar Investor members can learn more about each of the best bond funds by reviewing their Analyst Reports.
Top US Taxable-Bond Funds
- Baird Core Plus Bond BCOSX
- Dodge & Cox Income DODIX
- Fidelity Total Bond ETF FBND
- Hartford Total Return Bond ETF HTRB
- iShares Core US Aggregate Bond ETF AGG
- JPMorgan Core Plus Bond ETF JCPB
- Pimco Active Bond ETF BOND
- Schwab US Aggregate Bond ETF SCHZ
- TCW MetWest Low Duration Bond MWLIX
- Vanguard Total Bond Market ETF BND
ETFs and mutual funds that land in the long-term, intermediate-term, short-term, and ultrashort bond categories cluster here. These bond funds blend government bonds, asset-backed or mortgage-backed securities, investment-grade and high-yield debt, and a modest amount of international bonds. Although some funds are more income-oriented or more opportunistic than others, most provide decent exposure to a variety of bond types.
Morningstar Investor subscribers can access complete lists of the best core bond and core-plus bond funds.
17,375 Bonds to Buy Now!
Top Flexible-Bond Funds
- BlackRock Strategic Income Opportunities BASIX
- Fidelity Strategic Income FADMX
- FPA Flexible Fixed Income FFIAX
- Hartford Strategic Income HSNIX
- Loomis Sayles Fixed Income LSFIX
- Pimco Income PIMIX
Multisector and nontraditional bond ETFs and mutual funds land here. Like domestic taxable-bond funds, flexible-bond funds can invest across a mix of bond types. Unlike domestic taxable-bond funds, flexible-bond funds invest more aggressively in lower-quality bonds and/or international debt. Nontraditional bond funds, in particular, enjoy a high degree of interest rate flexibility and may employ shorting. Simply put, these are the least constrained bond funds.
Top Government-Bond Funds
- American Funds US Government Securities GVTFX
- Pimco GNMA and Government Securities PDMIX
- Vanguard Intermediate-Term Treasury Index VIIGX
The highest-quality taxable-bond mutual funds and ETFs reside in this group. To be included in one of the US government bond categories, a fund must keep at least 90% of its assets tucked in government securities. Funds that invest strictly in Treasuries, strictly in MBS, or in some combination of the two populate the group. There are three government-focused categories included here, broken down by duration: short government, intermediate government, and long government.
Morningstar Investor subscribers can access a full list of highly rated government bond funds.
Top Corporate Bond Funds
- American Funds American High Income AHIFX
- BlackRock High Yield BHYIX
- Fidelity Floating Rate High Income FFRHX
- T. Rowe Price Floating Rate PRFRX
These ETFs and mutual funds favor bonds issued by corporations. Categories in this group include corporate bond funds, high-yield bond funds, and bank-loan funds. Corporate bond funds focus on investment-grade bonds; these funds, therefore, exhibit some degree of interest rate sensitivity. High-yield bond funds target bonds rated as below-investment-grade; these funds invite more credit risk than interest rate risk. Finally, bank-loan funds also invest in securities rated as below-investment-grade, and their interest payments are periodically reset. Because of their floating rates, bank loans theoretically have less sensitivity to interest rate movements.
Top World and Emerging-Market Bond Funds
- BlackRock Strategic Global Bond MDWIX
- Dodge & Cox Global Bond DOXIX
- Pimco Emerging Markets Bond PEBIX
- T. Rowe Price Emerging Markets Bond PRXIX
- Vanguard Total International Bond VTIBX
The ETFs and mutual funds in this group favor fixed-income securities issued by governments and corporations outside of the US. That’s about the only thing they all have in common. World-bond funds must invest at a minimum of 40% of their assets in non-US debt, but some exclude US debt entirely, focus on corporates rather than governments, or hedge currencies—or don’t. Emerging-markets debt funds, meanwhile, keep at least 65% of their assets in developing-market debt, but here, too, there are significant variations in currency strategies.
Morningstar Investor subscribers: Access your full list of top-rated global bond funds.
Top Inflation-Protected Bond Funds
- iShares Short-Term TIPS Bond Index BIIPX
- Schwab Treasury Inflation Protected Securities SWRSX
- Vanguard Short-Term Inflation Protected Securities Index VTAPX
As the name suggests, inflation-protected bond ETFs and mutual funds seek to protect investors from rising inflation. As such, these funds invest in securities whose principal values adjust along with the rate of inflation.
Top Municipal-Bond Funds
- American Funds Tax-Exempt Bond AFTEX
- Baird Core Intermediate Municipal Bond BMNIX
- Fidelity Municipal Income FHIGX
- T. Rowe Price High Yield Municipal Bond PTYIX
- Vanguard Limited-Term Tax-Exempt VMLTX
Municipal-bond ETFs and mutual funds invest in bonds that are issued by state and local governments to finance capital expenditures. Unlike taxable bonds, municipal bonds provide tax advantages that can be especially appealing to higher-income investors who are investing via taxable accounts. How? Municipal bonds are often exempt from federal taxes, as well as state and local taxes.
On the surface, municipal bonds appear to yield less than taxable bonds of similar quality and maturity—but that’s before taxes are taken into consideration. How can you determine whether municipal bonds are a good choice for you? Use a tax-equivalent yield calculator to see how a given municipal-bond ETF or mutual fund’s yield compares with the yield of a similar maturity and quality taxable-bond ETF or mutual fund, given your particular tax circumstances.
The Best Bond Funds for Beginners
How should new investors who are saving for retirement choose the best bond funds?
Christine Benz, Morningstar director of personal finance and retirement planning, suggests that your time horizon should be your guide to how much bond exposure you need. “For people who are in the accumulation phase, they are mainly looking to that diversification benefit that with even a little bit of fixed-income exposure in a portfolio that’s mainly equities, you can bring down the volatility in that portfolio quite significantly,” she says.
She’s also a fan of keeping things simple and suggests that most investors saving for retirement stick with a low-cost intermediate-term core bond or core-plus bond fund (or an intermediate-term muni fund, if investing in a taxable account and you’re in a high tax bracket), which do a better job of diversifying an equity-heavy portfolio than many other bond types.
Here are Benz’s recommended asset allocations by time horizon, based on her model portfolios.
Long Time Horizon
Anticipated Time Horizon to Retirement: 35-40 years
Risk Tolerance/Capacity: High
Target Stock/Bond Mix: 95/5
Benz recommends investing the 5% bond allocation in a low-cost core bond or a core-plus bond fund.
Intermediate-Term Time Horizon
Anticipated Time Horizon to Retirement: 20-25 years
Risk Tolerance/Capacity: Moderate
Target Stock/Bond Mix: 80/20
The 20% bond allocation at this life stage should be entirely focused on a core bond or a core-plus bond fund, too, says Benz.
Short Time Horizon
Anticipated Time Horizon to Retirement: 2-5 years
Risk Tolerance/Capacity: Low
Target Stock/Bond Mix: 50/50
Benz suggests splitting the 50% bond allocation among three bond fund types.
- 30% should be allocated to an intermediate-term core bond or core-plus bond fund.
- 10% should be allocated to a TIPS fund.
- 10% should be allocated to a short-term bond fund.
How to Build the Bond Core of Your Portfolio
The Best Bond Funds for Retirees
Once in retirement, bond funds typically serve an additional role in your portfolio.
“For people who are in retirement, that diversification benefit is still really valuable, but the fixed-income securities are securing a portion of the retiree’s cash flows,” explains Benz. “They’re helping to stabilize it, effectively lock it down, so the retiree doesn’t have to worry so much about what’s going on in the equity market. They know that they have a stable source of funds that they could pull from in a pinch.”
In retirement, Benz recommends a Bucket approach to establishing your asset allocation in retirement. In that approach, she advocates for owning a few different bond-fund types—including intermediate-term core and core-plus bond funds, short-term bond funds, and TIPS funds (and, of course, municipal bond funds if you’re in a high tax bracket). Here, too, Benz’s suggested allocations vary by anticipated time horizon for the money.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
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