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BND vs. MBB: What’s The Difference?

The Vanguard Total Bond Market Index Fund ETF Shares (BND) and the iShares MBS ETF (MBB) are both among the Top 100 ETFs. BND is a Vanguard Intermediate-Term Bond fund and MBB is a iShares Intermediate Government fund. So, what’s the difference between BND and MBB? And which fund is better?

The expense ratio of BND is 0.03 percentage points lower than MBB’s (0.03% vs. 0.06%). BND is mostly comprised of AAA bonds and MBB has a high exposure to AAA bond. Overall, BND has provided higher returns than MBB over the past ten years.

In this article, we’ll compare BND vs. MBB. We’ll look at risk metrics and annual returns, as well as at their portfolio growth and performance. Moreover, I’ll also discuss BND’s and MBB’s fund composition, industry exposure, and holdings and examine how these affect their overall returns.

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Summary

BNDMBB
NameVanguard Total Bond Market Index Fund ETF SharesiShares MBS ETF
CategoryIntermediate-Term BondIntermediate Government
IssuerVanguardiShares
AUM312.15B25.69B
Avg. Return4.09%3.08%
Div. Yield2.02%1.88%
Expense Ratio0.03%0.06%

The Vanguard Total Bond Market Index Fund ETF Shares (BND) is a Intermediate-Term Bond fund that is issued by Vanguard. It currently has 312.15B total assets under management and has yielded an average annual return of 4.09% over the past 10 years. The fund has a dividend yield of 2.02% with an expense ratio of 0.03%.

The iShares MBS ETF (MBB) is a Intermediate Government fund that is issued by iShares. It currently has 25.69B total assets under management and has yielded an average annual return of 3.08% over the past 10 years. The fund has a dividend yield of 1.88% with an expense ratio of 0.06%.

BND’s dividend yield is 0.14% higher than that of MBB (2.02% vs. 1.88%). Also, BND yielded on average 1.02% more per year over the past decade (4.09% vs. 3.08%). The expense ratio of BND is 0.03 percentage points lower than MBB’s (0.03% vs. 0.06%).

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Fund Composition

Holdings

BND - Holdings

BND Bond SectorsWeight
AAA68.72%
BBB16.17%
A11.87%
AA3.34%
Below B0.01%
B0.0%
BB0.0%
US Government0.0%
Others-0.11%

BND’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Below B at 68.72%, 16.17%, 11.87%, 3.34%, and 0.01%. The fund is less weighted towards B (0.0%), BB (0.0%), and US Government (0.0%) rated bonds.

MBB - Holdings

MBB Bond SectorsWeight
AAA99.51%
Others0.49%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

MBB’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.51%, 0.49%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.

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Risk Analysis

BNDMBB
Mean Return0.280.2
R-squared99.3474.38
Std. Deviation3.142.12
Alpha-0.140.14
Beta1.040.6
Sharpe Ratio0.880.87
Treynor Ratio2.643.02

The Vanguard Total Bond Market Index Fund ETF Shares (BND) has a Sharpe Ratio of 0.88 with a Treynor Ratio of 2.64 and a R-squared of 99.34. Its Mean Return is 0.28 while BND’s Alpha is -0.14. Furthermore, the fund has a Standard Deviation of 3.14 and a Beta of 1.04.

The iShares MBS ETF (MBB) has a Sharpe Ratio of 0.87 with a Treynor Ratio of 3.02 and a Mean Return of 0.2. Its Alpha is 0.14 while MBB’s R-squared is 74.38. Furthermore, the fund has a Beta of 0.6 and a Standard Deviation of 2.12.

BND’s Mean Return is 0.08 points higher than that of MBB and its R-squared is 24.96 points higher. With a Standard Deviation of 3.14, BND is slightly more volatile than MBB. The Alpha and Beta of BND are 0.28 points lower and 0.44 points higher than MBB’s Alpha and Beta.

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Performance

Annual Returns

BND vs. MBB - Annual Returns

YearBNDMBB
20207.71%4.03%
20198.71%6.27%
2018-0.04%0.81%
20173.62%2.37%
20162.57%1.28%
20150.39%1.28%
20145.96%6.16%
2013-2.14%-1.92%
20124.04%2.23%
20117.71%5.88%
20106.51%5.44%

BND had its best year in 2019 with an annual return of 8.71%. BND’s worst year over the past decade yielded -2.14% and occurred in 2013. In most years the Vanguard Total Bond Market Index Fund ETF Shares provided moderate returns such as in 2017, 2012, and 2014 where annual returns amounted to 3.62%, 4.04%, and 5.96% respectively.

The year 2019 was the strongest year for MBB, returning 6.27% on an annual basis. The poorest year for MBB in the last ten years was 2013, with a yield of -1.92%. Most years the iShares MBS ETF has given investors modest returns, such as in 2012, 2017, and 2020, when gains were 2.23%, 2.37%, and 4.03% respectively.

Portfolio Growth

BND vs. MBB - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
BND$10,000$15,4564.09%
MBB$10,000$13,9063.08%

A $10,000 investment in BND would have resulted in a final balance of $15,456. This is a profit of $5,456 over 11 years and amounts to a compound annual growth rate (CAGR) of 4.09%.

With a $10,000 investment in MBB, the end total would have been $13,906. This equates to a $3,906 profit over 11 years and a compound annual growth rate (CAGR) of 3.08%.

BND’s CAGR is 1.02 percentage points higher than that of MBB and as a result, would have yielded $1,550 more on a $10,000 investment. Thus, BND outperformed MBB by 1.02% annually.


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