The iShares MBS ETF (MBB) and the iShares 20+ Year Treasury Bond ETF (TLT) are both among the Top 100 ETFs. MBB is a iShares Intermediate Government fund and TLT is a iShares Long Government fund. So, what’s the difference between MBB and TLT? And which fund is better?
The expense ratio of MBB is 0.09 percentage points lower than TLT’s (0.06% vs. 0.15%). MBB is mostly comprised of AAA bonds and TLT has a high exposure to AAA bond. Overall, MBB has provided lower returns than TLT over the past 11 years.
In this article, we’ll compare MBB vs. TLT. We’ll look at risk metrics and annual returns, as well as at their performance and fund composition. Moreover, I’ll also discuss MBB’s and TLT’s industry exposure, holdings, and portfolio growth and examine how these affect their overall returns.
Summary
| MBB | TLT | |
| Name | iShares MBS ETF | iShares 20+ Year Treasury Bond ETF |
| Category | Intermediate Government | Long Government |
| Issuer | iShares | iShares |
| AUM | 25.69B | 15.15B |
| Avg. Return | 3.08% | 9.00% |
| Div. Yield | 1.88% | 1.5% |
| 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 20+ Year Treasury Bond ETF (TLT) is a Long Government fund that is issued by iShares. It currently has 15.15B total assets under management and has yielded an average annual return of 9.00% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.
MBB’s dividend yield is 0.38% higher than that of TLT (1.88% vs. 1.5%). Also, MBB yielded on average 5.92% less per year over the past decade (3.08% vs. 9.00%). The expense ratio of MBB is 0.09 percentage points lower than TLT’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.
| TLT 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% |
TLT’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 | TLT | |
| Mean Return | 0.2 | 0.63 |
| R-squared | 74.38 | 68.76 |
| Std. Deviation | 2.12 | 12.76 |
| Alpha | 0.14 | -2.83 |
| Beta | 0.6 | 3.54 |
| Sharpe Ratio | 0.87 | 0.55 |
| Treynor Ratio | 3.02 | 1.82 |
The iShares MBS ETF (MBB) has a Mean Return of 0.2 with a Beta of 0.6 and a Treynor Ratio of 3.02. Its Alpha is 0.14 while MBB’s R-squared is 74.38. Furthermore, the fund has a Sharpe Ratio of 0.87 and a Standard Deviation of 2.12.
The iShares 20+ Year Treasury Bond ETF (TLT) has a Alpha of -2.83 with a Beta of 3.54 and a Mean Return of 0.63. Its Treynor Ratio is 1.82 while TLT’s Sharpe Ratio is 0.55. Furthermore, the fund has a R-squared of 68.76 and a Standard Deviation of 12.76.
MBB’s Mean Return is 0.43 points lower than that of TLT and its R-squared is 5.62 points higher. With a Standard Deviation of 2.12, MBB is slightly less volatile than TLT. The Alpha and Beta of MBB are 2.97 points higher and 2.94 points lower than TLT’s Alpha and Beta.
Performance
Annual Returns
| Year | MBB | TLT |
| 2020 | 4.03% | 17.92% |
| 2019 | 6.27% | 14.93% |
| 2018 | 0.81% | -2.07% |
| 2017 | 2.37% | 8.92% |
| 2016 | 1.28% | 1.36% |
| 2015 | 1.28% | -1.65% |
| 2014 | 6.16% | 27.35% |
| 2013 | -1.92% | -13.91% |
| 2012 | 2.23% | 3.25% |
| 2011 | 5.88% | 33.6% |
| 2010 | 5.44% | 9.25% |
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 TLT, returning 33.6% on an annual basis. The poorest year for TLT in the last ten years was 2013, with a yield of -13.91%. Most years the iShares 20+ Year Treasury Bond ETF has given investors modest returns, such as in 2012, 2017, and 2010, when gains were 3.25%, 8.92%, and 9.25% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| MBB | $10,000 | $13,906 | 3.08% |
| TLT | $10,000 | $23,809 | 9.00% |
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 TLT, the end total would have been $23,809. This equates to a $13,809 profit over 11 years and a compound annual growth rate (CAGR) of 9.00%.
MBB’s CAGR is 5.92 percentage points lower than that of TLT and as a result, would have yielded $9,903 less on a $10,000 investment. Thus, MBB performed worse than TLT by 5.92% annually.
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