GOVT vs. TLT: What’s The Difference?

The iShares U.S. Treasury Bond ETF (GOVT) and the iShares 20+ Year Treasury Bond ETF (TLT) are both among the Top 100 ETFs. GOVT is a iShares Intermediate Government fund and TLT is a iShares Long Government fund. So, what’s the difference between GOVT and TLT? And which fund is better?

The expense ratio of GOVT is 0.10 percentage points lower than TLT’s (0.05% vs. 0.15%). GOVT is mostly comprised of AAA bonds and TLT has a high exposure to AAA bond. Overall, GOVT has provided lower returns than TLT over the past 8 years.

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

Summary

GOVT TLT
Name iShares U.S. Treasury Bond ETF iShares 20+ Year Treasury Bond ETF
Category Intermediate Government Long Government
Issuer iShares iShares
AUM 17.07B 15.15B
Avg. Return 2.67% 9.00%
Div. Yield 1.0% 1.5%
Expense Ratio 0.05% 0.15%

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 20+ Year Treasury Bond ETF (TLT) is a Long Government fund that is issued by iShares. It currently has 15.15B total assets under management and has yielded an average annual return of 9.00% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.

GOVT’s dividend yield is 0.50% lower than that of TLT (1.0% vs. 1.5%). Also, GOVT yielded on average 6.32% less per year over the past decade (2.67% vs. 9.00%). The expense ratio of GOVT is 0.10 percentage points lower than TLT’s (0.05% vs. 0.15%).

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Fund Composition

Holdings

GOVT - Holdings

GOVT Bond Sectors Weight
AAA 100.0%
Others 0.0%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

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.

TLT - Holdings

TLT Bond Sectors Weight
AAA 100.0%
Others 0.0%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

TLT’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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Risk Analysis

GOVT TLT
Mean Return 0 0.63
R-squared 0 68.76
Std. Deviation 0 12.76
Alpha 0 -2.83
Beta 0 3.54
Sharpe Ratio 0 0.55
Treynor Ratio 0 1.82

The iShares U.S. Treasury Bond ETF (GOVT) has a Mean Return of 0 with a Beta of 0 and a R-squared of 0. Its Sharpe Ratio is 0 while GOVT’s Standard Deviation is 0. Furthermore, the fund has a Treynor Ratio of 0 and a Alpha of 0.

The iShares 20+ Year Treasury Bond ETF (TLT) has a Standard Deviation of 12.76 with a Mean Return of 0.63 and a Sharpe Ratio of 0.55. Its Beta is 3.54 while TLT’s Treynor Ratio is 1.82. Furthermore, the fund has a Alpha of -2.83 and a R-squared of 68.76.

GOVT’s Mean Return is 0.63 points lower than that of TLT and its R-squared is 68.76 points lower. With a Standard Deviation of 0, GOVT is slightly less volatile than TLT. The Alpha and Beta of GOVT are 2.83 points higher and 3.54 points lower than TLT’s Alpha and Beta.

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Performance

Annual Returns

GOVT vs. TLT - Annual Returns

Year GOVT TLT
2020 7.92% 17.92%
2019 6.71% 14.93%
2018 0.74% -2.07%
2017 2.19% 8.92%
2016 0.92% 1.36%
2015 0.76% -1.65%
2014 4.99% 27.35%
2013 -2.84% -13.91%
2012 0.0% 3.25%
2011 0.0% 33.6%
2010 0.0% 9.25%

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 TLT, returning 33.6% on an annual basis. The poorest year for TLT in the last ten years was 2013, with a yield of -13.91%. Most years the iShares 20+ Year Treasury Bond ETF has given investors modest returns, such as in 2012, 2017, and 2010, when gains were 3.25%, 8.92%, and 9.25% respectively.

Portfolio Growth

GOVT vs. TLT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
GOVT $10,000 $12,297 2.67%
TLT $10,000 $15,799 9.00%

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 TLT, the end total would have been $15,799. This equates to a $5,799 profit over 8 years and a compound annual growth rate (CAGR) of 9.00%.

GOVT’s CAGR is 6.32 percentage points lower than that of TLT and as a result, would have yielded $3,502 less on a $10,000 investment. Thus, GOVT performed worse than TLT by 6.32% annually.


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