BND Dividends? Interest?

[Shane]

Just bought Vanguard's Total Bond Market Index ETF: BND in late 2018. Why are BND's interest payments showing up on my 1099 as ordinary dividends, instead of interest? Is that normal for a bond fund? Sorry if this is a dumb question, but I've never owned a bond fund before, so am experiencing this for the first time.

[FIPurpose]

Ordinary dividends include not only non-qualified equity dividends but also the income generated from bonds, money market securities and bank products. Income from products such as real estate investment trusts (REITs) and master limited partnerships (MLPs) is considered ordinary income.

http://mutualfunds.com/taxation/mutual-fund-distributions-how-dividend-taxed/

[MustacheAndaHalf]

You might want to compare BND to VTEB (Vanguard tax-exempt bond ETF).  Depending on your tax bracket, tax-exempt bonds could make sense.  There's also state-specific tax-exempt bonds (CA, NY, etc).

[Shane]

Ordinary dividends include not only non-qualified equity dividends but also the income generated from bonds, money market securities and bank products. Income from products such as real estate investment trusts (REITs) and master limited partnerships (MLPs) is considered ordinary income.

http://mutualfunds.com/taxation/mutual-fund-distributions-how-dividend-taxed/

Thanks for the link, @FIPurpose. That article answered my question.

[Shane]

You might want to compare BND to VTEB (Vanguard tax-exempt bond ETF).  Depending on your tax bracket, tax-exempt bonds could make sense.  There's also state-specific tax-exempt bonds (CA, NY, etc).

@MustacheAndaHalf, Thanks for the suggestion, but pretty sure it doesn't make much sense for us to bother with tax exempt bond funds, since we're generally in the 0% tax bracket.