[jstrom]

If you attempted to sell those treasury bonds now on the secondary, you would have to accept the same $99 the shares of VFITX are worth. The immediate, liquid value is the same either way. (You need a common unit to comapre in instead of VFITX in now-$ to bonds in principle-$.)

If you hold the bonds and/or VFITX instead, the interest pay out of the bonds and the distributions of VFITX should also come out equal (except not, the fund has the advantage that it can change its composition from buying/selling bonds, but also has the overhead of selecting and performing those transactions).

(In reference to your below comment, yes, fund != holding bonds. The fund is closer to you buying the bonds, but also buying/selling as bonds mature or you anticipate changes in rates)

[twblalock]

As mvilim noted in his response to my comment, the outcome is actually not equal, and VFITX underperformed bonds over the same period, by a larger amount than can be explained by its expense ratio.