The iShares MBS ETF (MBB) and the iShares 7-10 Year Treasury Bond ETF (IEF) are both among the Top 100 ETFs. MBB is a iShares Intermediate Government fund and IEF is a iShares Long Government fund. So, what’s the difference between MBB and IEF? And which fund is better?
The expense ratio of MBB is 0.09 percentage points lower than IEF’s (0.06% vs. 0.15%). MBB is mostly comprised of AAA bonds and IEF has a high exposure to AAA bond. Overall, MBB has provided lower returns than IEF over the past 11 years.
In this article, we’ll compare MBB vs. IEF. We’ll look at annual returns and holdings, as well as at their industry exposure and risk metrics. Moreover, I’ll also discuss MBB’s and IEF’s performance, portfolio growth, and fund composition and examine how these affect their overall returns.
Summary
| MBB | IEF | |
| Name | iShares MBS ETF | iShares 7-10 Year Treasury Bond ETF |
| Category | Intermediate Government | Long Government |
| Issuer | iShares | iShares |
| AUM | 25.69B | 13.44B |
| Avg. Return | 3.08% | 5.06% |
| Div. Yield | 1.88% | 0.84% |
| Expense Ratio | 0.06% | 0.15% |
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 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%.
MBB’s dividend yield is 1.04% higher than that of IEF (1.88% vs. 0.84%). Also, MBB yielded on average 1.99% less per year over the past decade (3.08% vs. 5.06%). The expense ratio of MBB is 0.09 percentage points lower than IEF’s (0.06% vs. 0.15%).
Fund Composition
Holdings
| MBB Bond Sectors | Weight |
| AAA | 99.51% |
| Others | 0.49% |
| Below B | 0.0% |
| B | 0.0% |
| BB | 0.0% |
| BBB | 0.0% |
| A | 0.0% |
| AA | 0.0% |
| US Government | 0.0% |
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.
| IEF 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% |
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.
Risk Analysis
| MBB | IEF | |
| Mean Return | 0.2 | 0.32 |
| R-squared | 74.38 | 77.56 |
| Std. Deviation | 2.12 | 5.42 |
| Alpha | 0.14 | -1.2 |
| Beta | 0.6 | 1.59 |
| Sharpe Ratio | 0.87 | 0.6 |
| Treynor Ratio | 3.02 | 1.97 |
The iShares MBS ETF (MBB) has a R-squared of 74.38 with a Beta of 0.6 and a Sharpe Ratio of 0.87. Its Treynor Ratio is 3.02 while MBB’s Standard Deviation is 2.12. Furthermore, the fund has a Alpha of 0.14 and a Mean Return of 0.2.
The iShares 7-10 Year Treasury Bond ETF (IEF) has a Alpha of -1.2 with a Standard Deviation of 5.42 and a Beta of 1.59. Its Mean Return is 0.32 while IEF’s Treynor Ratio is 1.97. Furthermore, the fund has a R-squared of 77.56 and a Sharpe Ratio of 0.6.
MBB’s Mean Return is 0.12 points lower than that of IEF and its R-squared is 3.18 points lower. With a Standard Deviation of 2.12, MBB is slightly less volatile than IEF. The Alpha and Beta of MBB are 1.34 points higher and 0.99 points lower than IEF’s Alpha and Beta.
Performance
Annual Returns
| Year | MBB | IEF |
| 2020 | 4.03% | 9.84% |
| 2019 | 6.27% | 8.38% |
| 2018 | 0.81% | 0.82% |
| 2017 | 2.37% | 2.47% |
| 2016 | 1.28% | 1.0% |
| 2015 | 1.28% | 1.55% |
| 2014 | 6.16% | 8.92% |
| 2013 | -1.92% | -6.12% |
| 2012 | 2.23% | 4.06% |
| 2011 | 5.88% | 15.46% |
| 2010 | 5.44% | 9.29% |
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 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.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| MBB | $10,000 | $13,906 | 3.08% |
| IEF | $10,000 | $16,936 | 5.06% |
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 IEF, the end total would have been $16,936. This equates to a $6,936 profit over 11 years and a compound annual growth rate (CAGR) of 5.06%.
MBB’s CAGR is 1.99 percentage points lower than that of IEF and as a result, would have yielded $3,030 less on a $10,000 investment. Thus, MBB performed worse than IEF by 1.99% annually.
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