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IGSB vs. GOVT: What’s The Difference?

The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) and the iShares U.S. Treasury Bond ETF (GOVT) are both among the Top 100 ETFs. IGSB is a iShares Short-Term Bond fund and GOVT is a iShares Intermediate Government fund. So, what’s the difference between IGSB and GOVT? And which fund is better?

The expense ratio of IGSB is 0.01 percentage points higher than GOVT’s (0.06% vs. 0.05%). IGSB is mostly comprised of BBB bonds and GOVT has a high exposure to AAA bond. Overall, IGSB has provided lower returns than GOVT over the past 8 years.

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

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Summary

IGSBGOVT
NameiShares 1-5 Year Investment Grade Corporate Bond ETFiShares U.S. Treasury Bond ETF
CategoryShort-Term BondIntermediate Government
IssueriSharesiShares
AUM26.63B17.07B
Avg. Return2.51%2.67%
Div. Yield2.02%1.0%
Expense Ratio0.06%0.05%

The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) is a Short-Term Bond fund that is issued by iShares. It currently has 26.63B total assets under management and has yielded an average annual return of 2.51% over the past 10 years. The fund has a dividend yield of 2.02% with an expense ratio of 0.06%.

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%.

IGSB’s dividend yield is 1.02% higher than that of GOVT (2.02% vs. 1.0%). Also, IGSB yielded on average 0.17% less per year over the past decade (2.51% vs. 2.67%). The expense ratio of IGSB is 0.01 percentage points higher than GOVT’s (0.06% vs. 0.05%).

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Fund Composition

Holdings

IGSB - Holdings

IGSB Bond SectorsWeight
BBB50.48%
A40.04%
AA7.46%
AAA2.21%
BB0.09%
Below B0.0%
B0.0%
US Government0.0%
Others-0.28%

IGSB’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and BB at 50.48%, 40.04%, 7.46%, 2.21%, and 0.09%. The fund is less weighted towards Below B (0.0%), B (0.0%), and US Government (0.0%) rated bonds.

GOVT - Holdings

GOVT Bond SectorsWeight
AAA100.0%
Others0.0%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

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.

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Risk Analysis

IGSBGOVT
Mean Return0.190
R-squared26.130
Std. Deviation20
Alpha0.690
Beta0.340
Sharpe Ratio0.820
Treynor Ratio4.820

The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) has a Sharpe Ratio of 0.82 with a Standard Deviation of 2 and a Beta of 0.34. Its Treynor Ratio is 4.82 while IGSB’s Mean Return is 0.19. Furthermore, the fund has a R-squared of 26.13 and a Alpha of 0.69.

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

IGSB’s Mean Return is 0.19 points higher than that of GOVT and its R-squared is 26.13 points higher. With a Standard Deviation of 2, IGSB is slightly more volatile than GOVT. The Alpha and Beta of IGSB are 0.69 points higher and 0.34 points higher than GOVT’s Alpha and Beta.

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Performance

Annual Returns

IGSB vs. GOVT - Annual Returns

YearIGSBGOVT
20205.26%7.92%
20197.01%6.71%
20181.34%0.74%
20171.41%2.19%
20161.77%0.92%
20150.7%0.76%
20140.74%4.99%
20131.03%-2.84%
20123.28%0.0%
20111.34%0.0%
20103.69%0.0%

IGSB had its best year in 2019 with an annual return of 7.01%. IGSB’s worst year over the past decade yielded 0.7% and occurred in 2015. In most years the iShares 1-5 Year Investment Grade Corporate Bond ETF provided moderate returns such as in 2011, 2017, and 2016 where annual returns amounted to 1.34%, 1.41%, and 1.77% 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.

Portfolio Growth

IGSB vs. GOVT - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
IGSB$10,000$12,0732.51%
GOVT$10,000$12,2972.67%

A $10,000 investment in IGSB would have resulted in a final balance of $12,073. This is a profit of $2,073 over 8 years and amounts to a compound annual growth rate (CAGR) of 2.51%.

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%.

IGSB’s CAGR is 0.17 percentage points lower than that of GOVT and as a result, would have yielded $224 less on a $10,000 investment. Thus, IGSB performed worse than GOVT by 0.17% annually.


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