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The Best Bond ETFs for UK Investors in 2025
Ruby Layram
12th May 2025
Looking to add some stability to your investment portfolio? Bonds might be the answer. They offer a way to balance out the ups and downs of the stock market. And with bond ETFs, you can easily invest in a diversified basket of bonds without the hassle of buying individual ones.
Here’s a rundown of some top bond ETFs for UK investors in 2025.
1. iShares Core Global Aggregate Bond UCITS ETF (AGGG)
This fund invests in a wide range of global investment-grade bonds, including both government and corporate bonds. It’s a solid option if you’re looking for broad diversification across different countries and sectors, which can help spread risk and smooth returns over time.
As of May 2025, the fund has delivered a year-to-date return of 4.73% and offers a weighted average yield to maturity of 3.60%, according to BlackRock.
For UK investors worried about currency risk, AGGG is available in various currency-hedged versions, including GBP
2. Vanguard Eurozone Government Bond UCITS ETF (EUR Accumulating)
This ETF focuses on government bonds from Eurozone countries, giving you exposure to sovereign debt within the euro area. It’s particularly appealing if you want to add a layer of stability to your portfolio via government-backed securities.
As of May 2025, the fund is priced at €23.86 and comes with a very low ongoing charge of just 0.07%, making it a cost-effective choice for long-term investors.
3. SPDR Bloomberg International Corporate Bond ETF (IBND)
IBND is designed to provide exposure to international corporate bonds, specifically investment-grade corporate debt issued outside the UK. It’s a good option for investors who are looking to diversify into global corporate bonds and earn income from international companies.
In May 2025, the fund is priced at $30.95, as reported by Yahoo Finance. It’s accessible via major investment platforms that offer international ETFs.
4. iShares £ Corporate Bond UCITS ETF
This ETF invests in a broad selection of sterling-denominated corporate bonds, primarily focusing on UK-based companies. It’s ideal if you want exposure to UK corporate debt without dealing with currency exchange risk.
According to BlackRock, the weighted average yield to maturity as of May 2025 is 5.44%, making it one of the higher-yielding options in the corporate bond space for UK investors.
5. Goldman Sachs USD High Yield Bond Active UCITS ETF
This actively managed ETF focuses on high-yield (i.e., below investment-grade) corporate bonds denominated in US dollars. It’s aimed at investors who are comfortable with taking on more risk in exchange for the possibility of higher returns.
As of May 2025, the fund is priced at $49.98. Because it’s actively managed, the fund managers have flexibility in selecting bonds they believe will outperform, which may suit those seeking a more hands-on strategy.
Should You Invest in Bond ETFs?
If you’ve been wondering whether bond ETFs deserve a place in your portfolio, you’re not alone. With interest rates fluctuating and economic uncertainty always lurking in the background, many UK investors are giving bond ETFs a second look. But are they right for you? Let’s weigh up the pros and cons.
The Pros
Let’s take a look at some of the reasons that Bond ETFs might be appealing to investors in 2025.
Diversification
Bond ETFs give you instant access to a basket of bonds across different issuers, sectors, and regions. This reduces the risk of being overly exposed to any single bond or company.
You’d need a substantial sum and a fair bit of effort to replicate this level of diversification on your own.
Liquidity and Convenience
Unlike traditional bonds, which can be difficult to trade and often require you to hold them until maturity, bond ETFs can be bought and sold on the stock exchange just like shares. That means you can access your money quickly if you need it.
Income Generation
Many bond ETFs pay regular distributions, making them appealing to income-focused investors, especially in a low interest rate environment.
They can be a good way to earn steady returns without the rollercoaster ride of the stock market.
Lower Costs
Because they’re typically passively managed, bond ETFs usually come with lower fees than actively managed bond funds. That means more of your money stays invested and working for you.
The Cons
Although there are certainly a lot of advantages to investing in bond ETFs, it’s also important to consider the drawbacks.
Interest Rate Sensitivity
Bond prices tend to fall when interest rates rise, and this can affect the value of your ETF. If you invest in long-duration bond ETFs during a period of rising rates, you could see short-term losses—even if the income looks attractive.
Credit Risk
While government and investment-grade bond ETFs are relatively low risk, high-yield bond ETFs (sometimes called “junk bonds”) can carry much more credit risk. If the economy turns, defaults can rise and prices can drop sharply.
Currency Risk
If you’re investing in bond ETFs that are denominated in foreign currencies (like USD or EUR), currency fluctuations can have a big impact on your returns.
Some funds offer hedged versions to minimise this risk, but they may come with slightly higher fees.
No Fixed Maturity
Unlike buying an individual bond, which pays out a fixed amount at maturity, bond ETFs don’t have an end date.
Their prices can fluctuate with market sentiment, and there’s no guarantee you’ll get back your initial investment if you need to sell at the wrong time.
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