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All bonds are susceptible to fluctuations in interest rates. If interest rates rise, bond prices will generally decline, despite the lack of change in both the coupon and maturity. The degree of price volatility due to changes in interest rates is usually more pronounced for longer-term securities. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Inflation risk is a risk that the income generated may be lower than the rate of inflation. Inflation may diminish the purchasing power of a bond's interest and principal.

Bonds and their issuers generally receive a credit grade rating by independent rating agencies. An ETF can have a stated objective to invest in investment grade or better or in lower grade bonds with higher yields. Changes in credit rating can also affect prices. If one of the major rating services lowers its credit rating for a particular issue, the price of that security usually declines. Less creditworthy issuers may be more likely to default on interest payments or principal repayment. If a bond issuer fails to make either a coupon or principal payment when they are due, or fails to meet some other provision of the bond indenture, it is said to be in default.

Some bonds have call features, which means they can be redeemed or paid off at the issuer's discretion before maturity. Typically, an issuer will call a bond when interest rates fall, potentially leaving investors with a capital loss or loss in income and less favorable reinvestment options.

If a bond is not traded on a regular basis, the market for this bond may not be considered liquid. This can be attributed to the large number of issuers and variety of securities. For example, with limited exceptions for some large more actively traded issues, the chances of finding a specific municipal bond in the secondary market at any given time are relatively small. Selling prior to maturity can present a challenge for municipal bond investors due to the fragmented and thinly traded nature of the market.

The issuer's geography may carry additional risks. A global bond fund may hold foreign securities which are subject to interest-rate, currency-exchange-rate, economic, and political risks, all of which may be magnified in emerging markets. Foreign markets are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, economic or other developments. These risks are particularly significant for funds that focus on a single country or region.

Corporate bonds are susceptible to all the risks described above. In addition, a corporate bond's payments are dependent on the issuer's ability to generate cash flow. Unforeseen events could impact their ability to meet those commitments. Corporate bond issuers fall into four main sectors: industrial, financial, utilities, and transportation. Bonds in these economic sectors can be affected by a range of factors, including corporate events, consumer demand, changes in the economic cycle, changes in regulation, interest rate and commodity volatility, changes in overseas economic conditions, and currency fluctuations. Many corporate bonds may have call provisions, which means they can be redeemed or paid off at the issuer's discretion prior to maturity. Typically an issuer will call a bond when interest rates fall potentially leaving investors with a capital loss or loss in income and less favorable reinvestment options.

While Government Sponsored Entities (GSE) and agency bonds have relatively low credit risk, there is some risk that the issuing agency or GSE will default. GSE and agency bonds are not an obligation of the U.S. government; credit and default risk is based on the individual issuer. Yields on GSE and agency bonds are usually higher than those offered by Treasuries, there is a risk that the income generated may be lower than the rate of inflation. Inflation may diminish the purchasing power of a bond's interest and principal. Some agency or GSE bonds have call features, which means they can be redeemed or paid off at the issuer's discretion before maturity. Typically, an issuer will call a bond when interest rates fall, potentially leaving investors with a capital loss or loss in income and less favorable reinvestment options.

Municipal bonds are susceptible to all the risks described above. The vast majority of municipal bonds are not traded on a regular basis; therefore, the market for a specific municipal bond may not be particularly liquid. This can be attributed to the large number of municipal issuers and variety of securities. With limited exceptions for some large more actively traded issues, the chances of finding a specific municipal bond in the secondary market at any given time are relatively small. Selling prior to maturity can present a challenge for municipal bond investors due to the fragmented and thinly traded nature of the market. With revenue bonds, the interest and principal are dependent on the revenues paid by users of a facility or service, or other dedicated revenues including those from special taxes. In general, the consumer spending that provides the funding or income stream for revenue bond issuers may be more vulnerable to changes in consumer tastes or a general economic downturn than the income stream for general obligation bond issuers. "Essentiality" is a key investor consideration for a project financed with revenue bonds. For example, a facility that delivers fundamental or essential services, such as water and sewer, may be more likely to have dependable revenues through multiple economic cycles. Many municipal bonds carry provisions that allow the issuer to call or redeem the bond prior to the actual maturity date. An issuer will typically call bonds when prevailing interest rates drop, making reinvestment less desirable for the holder. Some municipal bonds, including housing bonds and certificates of participation (COPs), may be callable at any time regardless of the stated call features. In some cases, bond issuers will call bonds to modify an indenture through a new offering. Special or extraordinary redemption provisions are provisions that give a bond issuer the right to call the bonds due to a one-time occurrence, such as a natural disaster, interruption to a revenue source, unexpended bond proceed, or cancelled projects.

Mortgage-backed securities are unsecured bonds or debentures of pass-through securities backed by pools of mortgages and issued by one of the following U.S. government-sponsored agencies: Government National Mortgage Association (“GNMA”); Federal National Mortgage Association (“FNMA”) and Federal Home Loan Mortgage Corporation (“FHLMC”). Bonds or debentures issued by government agencies, including Fannie Mae and Freddie Mac, are generally backed only by the general creditworthiness and reputation of the government agency issuing the bond or debenture and are not backed by the full faith and credit of the U.S. government. Mortgage-backed securities are subject to prepayment risk and extension risk. During periods of rising interest rates, certain debt obligations may be paid off substantially more slowly than originally anticipated and the value of those securities may fall sharply, resulting in a decline in the Fund's income and potentially in the value of the Fund's investments. Because of these risks, mortgage-backed securities react differently than other bonds to changes in interest rates. Small movements in interest rates (both increases and decreases) may quickly and significantly reduce the value of certain mortgage-backed securities. Investments in mortgage-related and other asset-backed securities are subject to the risk of significant credit downgrades, illiquidity, and defaults to a greater extent than many other types of fixed-income investments. During periods of falling interest rates, mortgage- and asset-backed securities may be called or prepaid, which may result in the Fund having to reinvest proceeds in other investments at a lower interest rate.

Preferred securities have characteristics of both stocks and bonds, and therefore may be subject to the risks of both the equity and bond markets. Many preferred securities carry a payment deferral feature, which allows the issuer, at its discretion, to suspend or defer all or a portion of dividend or interest payments. Payments, if suspended or deferred, may be cumulative or non-cumulative. In the case of non-cumulative preferred securities, deferred payments due not accumulate if unpaid, and the issuer is under no obligation to pay the missed payments in the future. If payments are deferred, usually the company is also no longer permitted to pay dividends on other securities ranked either equally, or lower, in the hierarchy of the company's capital structure. As a result, holders of noncumulative securities carry a greater potential risk of losing an important source of total return, whereas cumulative preferred shareholders may be able recoup lost income if a company is able to return to financial health and make up the missed payments. Many preferred securities carry call or other early redemption provisions that allow the issuer to redeem the security upon certain events or at its discretion. An issuer will often exercise a call provision when prevailing interest rates drop below the rate at which the security was originally issued. Many preferred securities include a conditional call option, allowing the issuer to redeem the securities at the liquidation value upon the occurrence of certain events (e.g. tax law changes disallows the deductibility of payments by the issuer's parent company, or subjects the issue to taxation separate from the parent company). Certain preferred securities permit the issuer, at its discretion, to extend the maturity date (if any) one or more times, which would ultimately delay final repayment of the security's principal. Certain preferred securities may not be able to be readily redeemed (liquidated) or may only be liquidated at a deep discount to par (face) value due to a limited secondary market for the securities.

The interest payments of TIPS are variable, they generally rise with inflation and fall with deflation.

Floating-rate loans generally are subject to restrictions on resale. They sometimes trade infrequently in the secondary market, so may be more difficult to value, buy, or sell. A floating-rate loan might not be fully collateralized, which may cause it to decline significantly in value.

These are lower-quality debt securities that involve greater risk of default or price changes due to potential changes in the credit quality of the issuer.