I have a question regarding bond funds used for part of our current income. Although I've read the discussions about Intermediate Index Fund versus Total Bond Market Fund and discussion on GNMA Fund, I seem to question which is best for our own situation. A long time investor in VFIJX (Ginnie) I exchanged it for VBILX last month. Had probably been in Ginnie for over 10 yrs but even tho Treasury backed, I had the impression Intermediate Bond Index was somewhat better in order to avoid subprime mortgage problems. Yet even before I did the exchange, I looked at VBILX holdings and saw 53% Treasury/Agency. It is the "Agency" part that I question. Obviously, the fund is holding up well, but is this where part of our monthly income and a large part of our "safe haven" money belongs? We also use VFIRX (Short Term Treasury Fund) in an equal amount for the same purpose.
These two funds comprise largest "slice of our pie" in our unsheltered account. We do have some individual bonds, but for simplicity and monthly income the funds have made for many a good night's sleep. So could someone please give me an explanation of the "Agency" part of VBILX? I thought Mr. Bogle specifically liked this fund even over Total Bond Market to avoid Fannie and Freddie.
Since we are enjoying retirement years, using bond funds for part of our monthly income, which of the intermediate term bond funds is best for us? We can handle NAV fluctuation but not wholesale underlying bond defaults.