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The Best Fixed Income ETFs to Buy in 2025
Ruby Layram
21st May 2025
Looking for a way to earn a steady income without taking wild risks? You’re not alone. With interest rates set to shift again and uncertainty hanging over the stock market, more investors are turning to fixed income ETFs in 2025, and for good reason. They offer a simple way to earn regular income while keeping your risk in check.
Here’s everything you need to know about fixed income ETFs, why they might be right for your portfolio, and which ones are looking good this year.
What Are Fixed Income ETFs?
Fixed income ETFs are funds that invest in bonds, like government bonds, corporate bonds, and other debt securities, and they’re traded on stock exchanges just like shares. They aim to provide investors with a regular income (hence the term “fixed income”) through interest payments made by the bonds they hold.
Think of them as a ready-made basket of bonds, managed for you, so you don’t have to go buying individual gilts or corporate bonds yourself. They offer diversification, are easy to trade, and often come with lower fees compared to actively managed bond funds.
Why Fixed Income ETFs Are Popular in 2025
After years of rock-bottom interest rates, we’re finally seeing bonds make a comeback. Central banks in both the UK and the US are signalling potential rate cuts this year, which tends to benefit bond prices.
That makes 2025 a very interesting time to be looking at fixed income.
Here’s why investors are piling in:
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Steady income: You can earn regular interest payouts, which is ideal if you want a bit of predictability.
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Diversification: Bonds often behave differently to stocks, so they can balance out the bumps in your portfolio.
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Lower risk (generally): While no investment is risk-free, bonds (especially government ones) tend to be more stable than shares.
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Access to global markets: You can invest in both UK and international bonds easily through ETFs.
The Best Fixed Income ETFs to Buy in 2025
If you’re thinking about dipping your toes into fixed income, here are some top picks to consider in May 2025:
iShares Core U.S. Aggregate Bond ETF (AGG)
This is a solid, no-fuss option for anyone who wants wide exposure to the US bond market.
It includes a mix of government bonds, corporate bonds, and mortgage-backed securities.
With a low fee of just 0.03% and a yield hovering around 3.4%, it’s ideal for long-term investors looking for steady income and diversification.
Vanguard Total Bond Market ETF (BND)
Vanguard’s BND is another great all-rounder that covers the entire US investment-grade bond market.
It’s known for being reliable, low-cost (also with a 0.03% fee), and suitable for those who want a “buy it and forget about it” fixed income option.
The current yield is around 3.2%, and it provides a nice bit of ballast in a balanced portfolio.
Vanguard Total International Bond ETF (BNDX)
If you want to go global, BNDX gives you exposure to high-quality international bonds, including government and corporate debt from outside the US. It’s also currency-hedged, which helps protect UK investors from wild exchange rate swings.
It offers a juicy yield close to 4.85% and charges just 0.07% in fees- pretty good for international exposure.
JPMorgan Ultra-Short Income ETF (JPST)
JPST focuses on very short-term, low-risk bonds, making it a good step up from holding cash. With a yield of around 4.5% and relatively low volatility, it’s great if you’re after a stable income stream without tying up your money long-term.
It’s not the cheapest (0.18% fee), but the performance and consistency make it a favourite among cautious investors.
iShares iBonds Dec 2025 Term Treasury ETF (IT25)
What’s clever about IT25 is that it works a bit like a traditional bond, it holds US Treasuries that all mature in December 2025. That means you get some price stability, plus you know exactly when you’ll get your money back.
It currently offers a yield to maturity of around 5%, making it a good choice if you want predictability and a decent return in the short term.
SPDR Bloomberg High Yield Bond ETF (JNK)
As the name suggests, this ETF invests in high-yield (aka junk) bonds- orporate bonds with higher risk but also higher potential returns. With a yield of around 6.5%, it’s not one for the faint-hearted, but it can be a great addition if you’re happy to take on a bit more risk in exchange for more income.
Just be aware that it’s more sensitive to economic wobbliness.
Vanguard Short-Term Corporate Bond ETF (VCSH)
VCSH focuses on short-term corporate bonds that are investment-grade, meaning they’re issued by financially solid companies. It’s a nice middle ground: lower risk than longer-term bonds, but still offering a respectable yield of around 3.5%.
With a rock-bottom fee of 0.04%, it’s a popular choice for cautious investors who still want to earn a bit more than cash savings.
PIMCO Active Bond ETF (BOND)
If you prefer a human touch to your investments, BOND is actively managed by the bond experts at PIMCO.
It invests across a range of fixed income assets, adjusting with market conditions. While the fee is higher at 0.70%, some investors don’t mind paying a bit extra for the flexibility and professional oversight.
It’s a good option if you want to leave the bond picking to the pros.
How to Invest in Fixed Income ETFs as a UK Investor
Good news, you don’t need to live in the US or have a Wall Street broker to get started.
Here’s how you can buy fixed-income ETFs from the UK:
Step 1: Choose a UK-friendly platform
Look for an investment platform or ISA provider that offers access to US and international ETFs. Some popular ones include:
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Hargreaves Lansdown
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Freetrade
Make sure they offer fractional shares if you don’t want to buy a full unit of some of the more expensive ETFs.
Step 2: Look for UCITS versions (if available)
Some of the big-name ETFs above also have UCITS-compliant versions that are listed on the London Stock Exchange.
These are ideal for UK investors, especially if you want to avoid US tax complications.
Step 3: Decide where to hold them
You can invest through:
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A Stocks & Shares ISA (for tax-free income and growth)
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A SIPP (if you’re investing for retirement)
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A General Investment Account (if you’ve maxed out your ISA allowance)
Step 4: Consider your currency exposure
Some ETFs are denominated in USD, which means your returns will be affected by the exchange rate. If that bothers you, look for GBP-hedged versions where available.
Final Thoughts
Fixed income ETFs are having a bit of a moment in 2025, and with good reason. They offer a practical way to earn regular income, smooth out portfolio ups and downs, and diversify into bonds without the faff.
Whether you’re after something rock-solid like US Treasuries or you fancy a bit more yield with high-risk corporate bonds, there’s something to suit every investor.
Just make sure to do your research, check fees, and invest in a way that fits with your personal goals. As always, if you’re unsure, it’s worth having a quick chat with a financial adviser.
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Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies, are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence. When investing your capital is at risk.
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