The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and the iShares U.S. Treasury Bond ETF (GOVT) are both among the Top 100 ETFs. HYG is a iShares High Yield Bond fund and GOVT is a iShares Intermediate Government fund. So, what’s the difference between HYG and GOVT? And which fund is better?
The expense ratio of HYG is 0.43 percentage points higher than GOVT’s (0.48% vs. 0.05%). HYG is mostly comprised of BB bonds and GOVT has a high exposure to AAA bond. Overall, HYG has provided higher returns than GOVT over the past 8 years.
In this article, we’ll compare HYG vs. GOVT. We’ll look at risk metrics and annual returns, as well as at their portfolio growth and industry exposure. Moreover, I’ll also discuss HYG’s and GOVT’s performance, holdings, and fund composition and examine how these affect their overall returns.
|Name||iShares iBoxx $ High Yield Corporate Bond ETF||iShares U.S. Treasury Bond ETF|
|Category||High Yield Bond||Intermediate Government|
The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) is a High Yield Bond fund that is issued by iShares. It currently has 20.03B total assets under management and has yielded an average annual return of 6.42% over the past 10 years. The fund has a dividend yield of 4.44% with an expense ratio of 0.48%.
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%.
HYG’s dividend yield is 3.44% higher than that of GOVT (4.44% vs. 1.0%). Also, HYG yielded on average 3.74% more per year over the past decade (6.42% vs. 2.67%). The expense ratio of HYG is 0.43 percentage points higher than GOVT’s (0.48% vs. 0.05%).
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|HYG Bond Sectors||Weight|
HYG’s Top Bond Sectors are ratings of BB, B, Below B, BBB, and AAA at 56.53%, 31.27%, 11.4%, 0.61%, and 0.28%. The fund is less weighted towards A (0.0%), AA (0.0%), and US Government (0.0%) rated bonds.
|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.
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The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) has a Alpha of 3.58 with a R-squared of 4.1 and a Sharpe Ratio of 0.7. Its Beta is 0.48 while HYG’s Treynor Ratio is 10.01. Furthermore, the fund has a Mean Return of 0.46 and a Standard Deviation of 6.96.
The iShares U.S. Treasury Bond ETF (GOVT) has a R-squared of 0 with a Sharpe Ratio of 0 and a Treynor Ratio of 0. Its Standard Deviation is 0 while GOVT’s Alpha is 0. Furthermore, the fund has a Mean Return of 0 and a Beta of 0.
HYG’s Mean Return is 0.46 points higher than that of GOVT and its R-squared is 4.10 points higher. With a Standard Deviation of 6.96, HYG is slightly more volatile than GOVT. The Alpha and Beta of HYG are 3.58 points higher and 0.48 points higher than GOVT’s Alpha and Beta.
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HYG had its best year in 2019 with an annual return of 14.23%. HYG’s worst year over the past decade yielded -5.55% and occurred in 2015. In most years the iShares iBoxx $ High Yield Corporate Bond ETF provided moderate returns such as in 2011, 2013, and 2017 where annual returns amounted to 5.89%, 5.9%, and 6.09% respectively.
The year 2020 was the strongest year for GOVT, returning 7.92% on an annual basis. The poorest year for GOVT in the last ten years was 2013, with a yield of -2.84%. Most years the iShares U.S. Treasury Bond ETF has given investors modest returns, such as in 2018, 2015, and 2016, when gains were 0.74%, 0.76%, and 0.92% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in HYG would have resulted in a final balance of $14,382. This is a profit of $4,382 over 8 years and amounts to a compound annual growth rate (CAGR) of 6.42%.
With a $10,000 investment in GOVT, the end total would have been $12,297. This equates to a $2,297 profit over 8 years and a compound annual growth rate (CAGR) of 2.67%.
HYG’s CAGR is 3.74 percentage points higher than that of GOVT and as a result, would have yielded $2,085 more on a $10,000 investment. Thus, HYG outperformed GOVT by 3.74% annually.
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