Similar duration, different risks: comparing BND and PIMCO Income

If you are comparing bond funds, duration is a useful place to start. It estimates how sensitive a fund's value is to an interest-rate move. But two funds can arrive at a similar number through very different portfolios.

BND—the ETF share class of Vanguard Total Bond Market Index Fund—and PIMCO Income illustrate the distinction. Their holdings, financing, and credit exposures help explain what their durations capture, and what you still need to understand before comparing them.

Reporting dates. All figures below are from each fund's Form N-PORT for the quarter ended March 31, 2026—Vanguard Total Bond Market filed May 28, 2026, and PIMCO Income filed May 29, 2026. The two portfolio dates match.

For an introduction to the measures, see What duration tells you about a bond fund—and what it misses.

Similar sensitivity to rates

Both funds' interest-rate durations were close to six years—about 5.6 years for BND and 6.1 years for PIMCO Income. That would suggest broadly similar sensitivity to the same small, parallel move in benchmark rates. It would not establish that the funds have similar overall risk.

Each holdings figure is a market value as a share of net assets, as reported on Form N-PORT; it is not the notional exposure of a derivative—the reference amount used to calculate a derivative's payments. The duration and spread-duration figures are calculated from the funds' reported dollar sensitivities relative to net assets, using a consistent sign convention (see the note at the end). The same definitions are used for both funds.

The spread-duration row is essential to the comparison. It shows how sensitive each fund is to changes in the extra yield investors demand for credit risk, separately from its sensitivity to benchmark rates.

Different holdings and financing

An index approach and an active approach give investors different ways to own bonds. An index fund aims to track a defined market. An active fund gives its managers scope to choose sectors and adjust exposures within its mandate. Neither description, by itself, tells you how much risk the portfolio carries.

BND's allocation included about 21% in securitized holdings, in addition to its government and corporate bonds. PIMCO Income's allocation was more heavily concentrated in securitized holdings, as the table shows.

Securitized holdings are investments backed by pools of assets, such as mortgages or loans. The label covers different structures and credit qualities. A larger share is a reason to inspect the underlying holdings, rather than assume they all behave alike.

The financing question is just as important. If a fund reports long holdings worth 152% of net assets, that means approximately $152 of long holdings for every $100 of net assets, using that measurement basis. Net assets are what remains after liabilities are deducted.

That relationship can help identify the role of financing, but it does not tell you exactly how positions are funded or measure every derivative's economic exposure.

PIMCO Income's filing also reports derivatives with a market value of about 3% of net assets (roughly 1,600 positions), short securitized positions of about 1.5%, and reverse-repurchase borrowing of about 1.3%. These figures provide context, but do not by themselves explain the full difference between long holdings and net assets. The market value of derivatives is not a measure of how much financing they provide.

BND's filing shows cash bonds and a small short securitized position (about 0.15% of net assets); it reports no derivatives or reverse-repurchase borrowing.

Duration summarizes the resulting rate sensitivity. It does not separately explain funding costs, the need to provide collateral, or how easily holdings could be sold in stressed markets.

Different exposure to credit spreads

A bond can lose market value even when its borrower continues making payments. If investors demand more compensation for holding its credit risk, its spread can widen and its price can fall.

Compare total spread duration first, then examine the investment-grade and high-yield components. Investment-grade debt has higher credit ratings; high-yield debt has lower ratings and generally greater repayment risk. Both can be sensitive to changing spreads.

High-yield positions accounted for about 1% of BND's total spread duration and about 16% of PIMCO Income's. These contributions include offsets: negative sensitivity at one maturity can reduce positive sensitivity at another.

Those percentages are not percentages of portfolio holdings. They describe contributions to a sensitivity measure. Confusing the two would give readers a different picture of what the funds own.

Flagged holdings provide another piece of context. “In default” and “in arrears” refer to problems meeting obligations or making payments. Payment in kind means interest is paid in additional debt rather than cash; that feature alone does not establish that a borrower is in distress.

PIMCO Income reported about 0.1% of its debt value in default and a separate 0.1% in arrears (these are distinct flags, not added together), and about 0.4%—roughly $1.3 billion—in payment-in-kind holdings. Percentages are of the fund's debt value. BND reported no positions under any of these flags—"none reported," as the fields are present and zero, rather than simply missing.

Why maturity and duration differ

Maturity is when a bond is scheduled to repay its principal. Duration measures sensitivity to a change in rates. They answer different questions.

Average stated maturity was 11.7 years for BND and 22.8 years for PIMCO Income, value-weighted across each fund's debt holdings. Both are longer than the durations in the table. The gap is not unique to PIMCO Income.

Mortgage borrowers can repay early, so a mortgage-backed security's payments may arrive well before its final stated maturity. Floating interest payments and portfolio hedges can also reduce rate sensitivity relative to what final maturity alone might suggest.

Fixed-rate holdings were about 95% of BND's debt and about 68% of PIMCO Income's, with most of the remainder floating-rate. A lower fixed-rate share is one reason a fund's duration can sit below what its stated maturities suggest, though the reported figure should not be read as the manager's chosen duration target.

A currency breakdown adds context too. BND's rate sensitivity was in one currency (US dollars), while PIMCO Income's spanned eighteen currencies. Interest-rate exposure in multiple currencies is different from unhedged exposure to exchange-rate moves. Currency hedges need to be considered separately.

What to check before comparing income

A yield comparison is useful only when the measures describe comparable things.

The current yield on USD fixed-rate debt was about 3.9% for BND and 5.0% for PIMCO Income. These figures cover only each fund's USD fixed-rate holdings. They are not yields to maturity or fund distribution yields, and do not estimate the income you will receive.

Fees depend on the share class you own. BND—the ETF share class—reports an expense ratio of about 0.03%. PIMIX is PIMCO Income's institutional share class; its expense ratio is not available in the data used here. Check the prospectus for the share class you are considering. The yield gap alone should not be read as an exact payment for the risks described above.

Three questions to take to your next comparison

• What could make each fund lose value? Read rate and spread sensitivity together, alongside the holdings and financing that produce them.
• What am I actually comparing? Check reporting dates, share classes, denominators, and the coverage of each measure.
• Does the difference suit the job I want this fund to do? Similar duration is a starting point for that question, rather than an answer.

A note on the comparison

We use a consistent sign convention for both funds' rate and spread sensitivities, preserving negative contributions and offsets rather than replacing them with absolute values. Dollar sensitivities are converted to duration measures relative to each fund's net assets.

Filing sources: Form N-PORT reports filed by Vanguard Total Bond Market on May 28, 2026, and PIMCO Income on May 29, 2026.

These filings describe portfolios at specific dates. They help make the differences visible, but do not establish how either fund will perform in the next market move.