2025 BND Returns--and future implications

Original Reddit comment

Author argues California savers should prefer Treasuries over BND due to state tax inefficiency.

BND — AVOID The author argues that BND's corporates and MBS add marginal return that is not worth the state tax burden for California savers. Holding these taxable bonds in a non-retirement account costs an extra 9.3% in state taxes each year. He suggests that the risk-adjusted returns may only make sense for those in minimal state income tax states.

the very marginal extra return of corporates and MBS in BND isn’t worth it to me as someone employed in California, paying extra 9.3% tax on them every year they sit in my non-retirement account.

VGSH — LONG The author recommends Treasuries like VGSH for California savers instead of BND due to their tax efficiency. The marginal extra return from BND's corporates and MBS is not worth the state tax hit. Treasuries avoid the state tax and provide a better after-tax outcome.

CA savers are better off with treasuries like VGSH and VGLT

VGLT — LONG The author recommends Treasuries like VGLT for California savers instead of BND due to their tax efficiency. The marginal extra return from BND's corporates and MBS is not worth the state tax hit. Treasuries avoid the state tax and provide a better after-tax outcome.

CA savers are better off with treasuries like VGSH and VGLT