A major corporate bond fund managed by Vanguard has raised the cost imposed on unitholders seeking to take their money out by up to twelve times, the latest twist hinting at genuine distress in the fixed income market,

The sell spread on the Vanguard Australian Corporate Fixed Interest Index Fund blew out to 1.79 per cent, from 0.15 per cent, meaning the underlying investor has to accept a 1.79 per cent haircut on what the underlying investment is worth to exit.

The fund has almost $700 million under management and has returned 2.22 per cent in the first two months of the year, and 7.68 per cent in 2019.

Vanguard, which manages around $8 trilllion globally, hiked the price of quitting all of its wholesale funds but reserved the biggest increase for its bond funds, citing rising transaction costs linked to trading, currency hedging and volatility which "has been the case particularly in fixed income markets", it told financial advisers.

In addition to the corporate fixed income fund, it widened the spread on its Australian fixed index fund by nearly seven times from 8 basis points to 55 basis points.