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MBB vs. HYG: What’s The Difference?

The iShares MBS ETF (MBB) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) are both among the Top 100 ETFs. MBB is a iShares Intermediate Government fund and HYG is a iShares High Yield Bond fund. So, what’s the difference between MBB and HYG? And which fund is better?

The expense ratio of MBB is 0.42 percentage points lower than HYG’s (0.06% vs. 0.48%). MBB is mostly comprised of AAA bonds and HYG has a high exposure to BB bond. Overall, MBB has provided lower returns than HYG over the past 11 years.

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

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Summary

MBBHYG
NameiShares MBS ETFiShares iBoxx $ High Yield Corporate Bond ETF
CategoryIntermediate GovernmentHigh Yield Bond
IssueriSharesiShares
AUM25.69B20.03B
Avg. Return3.08%6.42%
Div. Yield1.88%4.44%
Expense Ratio0.06%0.48%

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%.

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%.

MBB’s dividend yield is 2.56% lower than that of HYG (1.88% vs. 4.44%). Also, MBB yielded on average 3.34% less per year over the past decade (3.08% vs. 6.42%). The expense ratio of MBB is 0.42 percentage points lower than HYG’s (0.06% vs. 0.48%).

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Fund Composition

Holdings

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.

HYG - Holdings

HYG Bond SectorsWeight
BB56.53%
B31.27%
Below B11.4%
BBB0.61%
AAA0.28%
A0.0%
AA0.0%
US Government0.0%
Others-0.09%

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.

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Risk Analysis

MBBHYG
Mean Return0.20.46
R-squared74.384.1
Std. Deviation2.126.96
Alpha0.143.58
Beta0.60.48
Sharpe Ratio0.870.7
Treynor Ratio3.0210.01

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

The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) has a Standard Deviation of 6.96 with a Treynor Ratio of 10.01 and a Sharpe Ratio of 0.7. Its Alpha is 3.58 while HYG’s Beta is 0.48. Furthermore, the fund has a R-squared of 4.1 and a Mean Return of 0.46.

MBB’s Mean Return is 0.26 points lower than that of HYG and its R-squared is 70.28 points higher. With a Standard Deviation of 2.12, MBB is slightly less volatile than HYG. The Alpha and Beta of MBB are 3.44 points lower and 0.12 points higher than HYG’s Alpha and Beta.

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Performance

Annual Returns

MBB vs. HYG - Annual Returns

YearMBBHYG
20204.03%4.12%
20196.27%14.23%
20180.81%-1.93%
20172.37%6.09%
20161.28%13.92%
20151.28%-5.55%
20146.16%2.0%
2013-1.92%5.9%
20122.23%13.83%
20115.88%5.89%
20105.44%12.07%

MBB had its best year in 2019 with an annual return of 6.27%. MBB’s worst year over the past decade yielded -1.92% and occurred in 2013. In most years the iShares MBS ETF provided moderate returns such as in 2012, 2017, and 2020 where annual returns amounted to 2.23%, 2.37%, and 4.03% respectively.

The year 2019 was the strongest year for HYG, returning 14.23% on an annual basis. The poorest year for HYG in the last ten years was 2015, with a yield of -5.55%. Most years the iShares iBoxx $ High Yield Corporate Bond ETF has given investors modest returns, such as in 2011, 2013, and 2017, when gains were 5.89%, 5.9%, and 6.09% respectively.

Portfolio Growth

MBB vs. HYG - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
MBB$10,000$13,9063.08%
HYG$10,000$19,4276.42%

A $10,000 investment in MBB would have resulted in a final balance of $13,906. This is a profit of $3,906 over 11 years and amounts to a compound annual growth rate (CAGR) of 3.08%.

With a $10,000 investment in HYG, the end total would have been $19,427. This equates to a $9,427 profit over 11 years and a compound annual growth rate (CAGR) of 6.42%.

MBB’s CAGR is 3.34 percentage points lower than that of HYG and as a result, would have yielded $5,521 less on a $10,000 investment. Thus, MBB performed worse than HYG by 3.34% annually.


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