MUB vs. GOVT: What’s The Difference?

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

The expense ratio of MUB is 0.02 percentage points higher than GOVT’s (0.07% vs. 0.05%). MUB is mostly comprised of AA bonds and GOVT has a high exposure to AAA bond. Overall, MUB has provided higher returns than GOVT over the past 8 years.

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

Summary

MUB GOVT
Name iShares National Muni Bond ETF iShares U.S. Treasury Bond ETF
Category Muni National Interm Intermediate Government
Issuer iShares iShares
AUM 22.71B 17.07B
Avg. Return 4.04% 2.67%
Div. Yield 1.96% 1.0%
Expense Ratio 0.07% 0.05%

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%.

The iShares U.S. Treasury Bond ETF (GOVT) is a Intermediate Government fund that is issued by iShares. It currently has 17.07B total assets under management and has yielded an average annual return of 2.67% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.05%.

MUB’s dividend yield is 0.96% higher than that of GOVT (1.96% vs. 1.0%). Also, MUB yielded on average 1.36% more per year over the past decade (4.04% vs. 2.67%). The expense ratio of MUB is 0.02 percentage points higher than GOVT’s (0.07% vs. 0.05%).

FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).

Fund Composition

Holdings

MUB - Holdings

MUB Bond Sectors Weight
AA 60.38%
AAA 18.39%
A 15.04%
BBB 6.0%
Others 0.17%
BB 0.02%
Below B 0.0%
B 0.0%
US Government 0.0%

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.

GOVT - Holdings

GOVT 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%

GOVT’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.

NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).

Risk Analysis

MUB GOVT
Mean Return 0.32 0
R-squared 99 0
Std. Deviation 3.68 0
Alpha -0.46 0
Beta 1.01 0
Sharpe Ratio 0.88 0
Treynor Ratio 3.2 0

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

The iShares U.S. Treasury Bond ETF (GOVT) has a Treynor Ratio of 0 with a Sharpe Ratio of 0 and a Alpha of 0. Its Beta is 0 while GOVT’s Mean Return is 0. Furthermore, the fund has a R-squared of 0 and a Standard Deviation of 0.

MUB’s Mean Return is 0.32 points higher than that of GOVT and its R-squared is 99.00 points higher. With a Standard Deviation of 3.68, MUB is slightly more volatile than GOVT. The Alpha and Beta of MUB are 0.46 points lower and 1.01 points higher than GOVT’s Alpha and Beta.

BTW: Uncorrelated crypto assets such as Bitcoin can serve as a hedge and mitigate risk. I've allocated around 5% of my portfolio to crypto assets through Coinbase - the simplest and cheapest broker I've found! Click here to read more (link to Coinbase).

Performance

Annual Returns

MUB vs. GOVT - Annual Returns

Year MUB GOVT
2020 4.87% 7.92%
2019 7.28% 6.71%
2018 0.86% 0.74%
2017 4.61% 2.19%
2016 0.06% 0.92%
2015 2.99% 0.76%
2014 8.61% 4.99%
2013 -3.26% -2.84%
2012 6.14% 0.0%
2011 10.85% 0.0%
2010 1.4% 0.0%

MUB had its best year in 2011 with an annual return of 10.85%. MUB’s worst year over the past decade yielded -3.26% and occurred in 2013. In most years the iShares National Muni Bond ETF provided moderate returns such as in 2015, 2017, and 2020 where annual returns amounted to 2.99%, 4.61%, and 4.87% respectively.

The year 2020 was the strongest year for GOVT, returning 7.92% on an annual basis. The poorest year for GOVT in the last ten years was 2013, with a yield of -2.84%. Most years the iShares U.S. Treasury Bond ETF has given investors modest returns, such as in 2018, 2015, and 2016, when gains were 0.74%, 0.76%, and 0.92% respectively.

Portfolio Growth

MUB vs. GOVT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
MUB $10,000 $12,852 4.04%
GOVT $10,000 $12,297 2.67%

A $10,000 investment in MUB would have resulted in a final balance of $12,852. This is a profit of $2,852 over 8 years and amounts to a compound annual growth rate (CAGR) of 4.04%.

With a $10,000 investment in GOVT, the end total would have been $12,297. This equates to a $2,297 profit over 8 years and a compound annual growth rate (CAGR) of 2.67%.

MUB’s CAGR is 1.36 percentage points higher than that of GOVT and as a result, would have yielded $555 more on a $10,000 investment. Thus, MUB outperformed GOVT by 1.36% annually.


Current recommendations:

Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:

P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!

1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!

2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).

3) If you are interested in crypto, check out Coinbase. I've started allocating a small amount of assets to the growing crypto space and Coinbase has just been a breeze to use. Once you register, make sure to also open an Coinbase Pro account to buy crypto at the lowest fees on the market (just 0.1%!).

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply