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MBB vs. MUB: What’s The Difference?

The iShares MBS ETF (MBB) and the iShares National Muni Bond ETF (MUB) are both among the Top 100 ETFs. MBB is a iShares Intermediate Government fund and MUB is a iShares Muni National Interm fund. So, what’s the difference between MBB and MUB? And which fund is better?

The expense ratio of MBB is 0.01 percentage points lower than MUB’s (0.06% vs. 0.07%). MBB is mostly comprised of AAA bonds and MUB has a high exposure to AA bond. Overall, MBB has provided lower returns than MUB over the past 11 years.

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

Summary

MBBMUB
NameiShares MBS ETFiShares National Muni Bond ETF
CategoryIntermediate GovernmentMuni National Interm
IssueriSharesiShares
AUM25.69B22.71B
Avg. Return3.08%4.04%
Div. Yield1.88%1.96%
Expense Ratio0.06%0.07%

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 National Muni Bond ETF (MUB) is a Muni National Interm fund that is issued by iShares. It currently has 22.71B total assets under management and has yielded an average annual return of 4.04% over the past 10 years. The fund has a dividend yield of 1.96% with an expense ratio of 0.07%.

MBB’s dividend yield is 0.08% lower than that of MUB (1.88% vs. 1.96%). Also, MBB yielded on average 0.96% less per year over the past decade (3.08% vs. 4.04%). The expense ratio of MBB is 0.01 percentage points lower than MUB’s (0.06% vs. 0.07%).

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.

MUB - Holdings

MUB Bond SectorsWeight
AA60.38%
AAA18.39%
A15.04%
BBB6.0%
Others0.17%
BB0.02%
Below B0.0%
B0.0%
US Government0.0%

MUB’s Top Bond Sectors are ratings of AA, AAA, A, BBB, and Others at 60.38%, 18.39%, 15.04%, 6.0%, and 0.17%. The fund is less weighted towards BB (0.02%), Below B (0.0%), and B (0.0%) rated bonds.

Risk Analysis

MBBMUB
Mean Return0.20.32
R-squared74.3899
Std. Deviation2.123.68
Alpha0.14-0.46
Beta0.61.01
Sharpe Ratio0.870.88
Treynor Ratio3.023.2

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

The iShares National Muni Bond ETF (MUB) has a Treynor Ratio of 3.2 with a Beta of 1.01 and a Sharpe Ratio of 0.88. Its Standard Deviation is 3.68 while MUB’s Mean Return is 0.32. Furthermore, the fund has a Alpha of -0.46 and a R-squared of 99.

MBB’s Mean Return is 0.12 points lower than that of MUB and its R-squared is 24.62 points lower. With a Standard Deviation of 2.12, MBB is slightly less volatile than MUB. The Alpha and Beta of MBB are 0.60 points higher and 0.41 points lower than MUB’s Alpha and Beta.

Performance

Annual Returns

MBB vs. MUB - Annual Returns

YearMBBMUB
20204.03%4.87%
20196.27%7.28%
20180.81%0.86%
20172.37%4.61%
20161.28%0.06%
20151.28%2.99%
20146.16%8.61%
2013-1.92%-3.26%
20122.23%6.14%
20115.88%10.85%
20105.44%1.4%

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 MUB, returning 10.85% on an annual basis. The poorest year for MUB in the last ten years was 2013, with a yield of -3.26%. Most years the iShares National Muni Bond ETF has given investors modest returns, such as in 2015, 2017, and 2020, when gains were 2.99%, 4.61%, and 4.87% respectively.

Portfolio Growth

MBB vs. MUB - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
MBB$10,000$13,9063.08%
MUB$10,000$15,3334.04%

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 MUB, the end total would have been $15,333. This equates to a $5,333 profit over 11 years and a compound annual growth rate (CAGR) of 4.04%.

MBB’s CAGR is 0.96 percentage points lower than that of MUB and as a result, would have yielded $1,427 less on a $10,000 investment. Thus, MBB performed worse than MUB by 0.96% annually.


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