The iShares U.S. Treasury Bond ETF (GOVT) and the iShares 7-10 Year Treasury Bond ETF (IEF) are both among the Top 100 ETFs. GOVT is a iShares Intermediate Government fund and IEF is a iShares Long Government fund. So, what’s the difference between GOVT and IEF? And which fund is better?
The expense ratio of GOVT is 0.10 percentage points lower than IEF’s (0.05% vs. 0.15%). GOVT is mostly comprised of AAA bonds and IEF has a high exposure to AAA bond. Overall, GOVT has provided lower returns than IEF over the past 8 years.
In this article, we’ll compare GOVT vs. IEF. We’ll look at industry exposure and risk metrics, as well as at their annual returns and fund composition. Moreover, I’ll also discuss GOVT’s and IEF’s holdings, portfolio growth, and performance and examine how these affect their overall returns.
|Name||iShares U.S. Treasury Bond ETF||iShares 7-10 Year Treasury Bond ETF|
|Category||Intermediate Government||Long Government|
The iShares U.S. Treasury Bond ETF (GOVT) is a Intermediate Government fund that is issued by iShares. It currently has 17.07B total assets under management and has yielded an average annual return of 2.67% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.05%.
The iShares 7-10 Year Treasury Bond ETF (IEF) is a Long Government fund that is issued by iShares. It currently has 13.44B total assets under management and has yielded an average annual return of 5.06% over the past 10 years. The fund has a dividend yield of 0.84% with an expense ratio of 0.15%.
GOVT’s dividend yield is 0.16% higher than that of IEF (1.0% vs. 0.84%). Also, GOVT yielded on average 2.39% less per year over the past decade (2.67% vs. 5.06%). The expense ratio of GOVT is 0.10 percentage points lower than IEF’s (0.05% vs. 0.15%).
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|GOVT Bond Sectors||Weight|
GOVT’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 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.
|IEF Bond Sectors||Weight|
IEF’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 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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The iShares U.S. Treasury Bond ETF (GOVT) has a Sharpe Ratio of 0 with a Standard Deviation of 0 and a Beta of 0. Its Alpha is 0 while GOVT’s R-squared is 0. Furthermore, the fund has a Treynor Ratio of 0 and a Mean Return of 0.
The iShares 7-10 Year Treasury Bond ETF (IEF) has a Treynor Ratio of 1.97 with a Sharpe Ratio of 0.6 and a R-squared of 77.56. Its Beta is 1.59 while IEF’s Mean Return is 0.32. Furthermore, the fund has a Alpha of -1.2 and a Standard Deviation of 5.42.
GOVT’s Mean Return is 0.32 points lower than that of IEF and its R-squared is 77.56 points lower. With a Standard Deviation of 0, GOVT is slightly less volatile than IEF. The Alpha and Beta of GOVT are 1.20 points higher and 1.59 points lower than IEF’s Alpha and Beta.
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GOVT had its best year in 2020 with an annual return of 7.92%. GOVT’s worst year over the past decade yielded -2.84% and occurred in 2013. In most years the iShares U.S. Treasury Bond ETF provided moderate returns such as in 2018, 2015, and 2016 where annual returns amounted to 0.74%, 0.76%, and 0.92% respectively.
The year 2011 was the strongest year for IEF, returning 15.46% on an annual basis. The poorest year for IEF in the last ten years was 2013, with a yield of -6.12%. Most years the iShares 7-10 Year Treasury Bond ETF has given investors modest returns, such as in 2017, 2012, and 2019, when gains were 2.47%, 4.06%, and 8.38% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in GOVT would have resulted in a final balance of $12,297. This is a profit of $2,297 over 8 years and amounts to a compound annual growth rate (CAGR) of 2.67%.
With a $10,000 investment in IEF, the end total would have been $12,898. This equates to a $2,898 profit over 8 years and a compound annual growth rate (CAGR) of 5.06%.
GOVT’s CAGR is 2.39 percentage points lower than that of IEF and as a result, would have yielded $601 less on a $10,000 investment. Thus, GOVT performed worse than IEF by 2.39% annually.
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