MBB vs. IGSB: What’s The Difference?

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

MBB and IGSB have the same expense ratio: 0.06%. MBB is mostly comprised of AAA bonds and IGSB has a high exposure to BBB bond. Overall, MBB has provided higher returns than IGSB over the past 11 years.

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

Summary

MBB IGSB
Name iShares MBS ETF iShares 1-5 Year Investment Grade Corporate Bond ETF
Category Intermediate Government Short-Term Bond
Issuer iShares iShares
AUM 25.69B 26.63B
Avg. Return 3.08% 2.51%
Div. Yield 1.88% 2.02%
Expense Ratio 0.06% 0.06%

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 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%.

MBB’s dividend yield is 0.14% lower than that of IGSB (1.88% vs. 2.02%). Also, MBB yielded on average 0.57% more per year over the past decade (3.08% vs. 2.51%). MBB and IGSB have the same expense ratio: 0.06%.

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Fund Composition

Holdings

MBB - 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.

IGSB - Holdings

IGSB Bond Sectors Weight
BBB 50.48%
A 40.04%
AA 7.46%
AAA 2.21%
BB 0.09%
Below B 0.0%
B 0.0%
US Government 0.0%
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.

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Risk Analysis

MBB IGSB
Mean Return 0.2 0.19
R-squared 74.38 26.13
Std. Deviation 2.12 2
Alpha 0.14 0.69
Beta 0.6 0.34
Sharpe Ratio 0.87 0.82
Treynor Ratio 3.02 4.82

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

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

MBB’s Mean Return is 0.01 points higher than that of IGSB and its R-squared is 48.25 points higher. With a Standard Deviation of 2.12, MBB is slightly more volatile than IGSB. The Alpha and Beta of MBB are 0.55 points lower and 0.26 points higher than IGSB’s Alpha and Beta.

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Performance

Annual Returns

MBB vs. IGSB - Annual Returns

Year MBB IGSB
2020 4.03% 5.26%
2019 6.27% 7.01%
2018 0.81% 1.34%
2017 2.37% 1.41%
2016 1.28% 1.77%
2015 1.28% 0.7%
2014 6.16% 0.74%
2013 -1.92% 1.03%
2012 2.23% 3.28%
2011 5.88% 1.34%
2010 5.44% 3.69%

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 IGSB, returning 7.01% on an annual basis. The poorest year for IGSB in the last ten years was 2015, with a yield of 0.7%. Most years the iShares 1-5 Year Investment Grade Corporate Bond ETF has given investors modest returns, such as in 2011, 2017, and 2016, when gains were 1.34%, 1.41%, and 1.77% respectively.

Portfolio Growth

MBB vs. IGSB - Portfolio Growth

Fund Initial Balance Final Balance CAGR
MBB $10,000 $13,906 3.08%
IGSB $10,000 $13,103 2.51%

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 IGSB, the end total would have been $13,103. This equates to a $3,103 profit over 11 years and a compound annual growth rate (CAGR) of 2.51%.

MBB’s CAGR is 0.57 percentage points higher than that of IGSB and as a result, would have yielded $803 more on a $10,000 investment. Thus, MBB outperformed IGSB by 0.57% annually.


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