SHY vs. GOVT: What’s The Difference?

The iShares 1-3 Year Treasury Bond ETF (SHY) and the iShares U.S. Treasury Bond ETF (GOVT) are both among the Top 100 ETFs. SHY is a iShares Short Government fund and GOVT is a iShares Intermediate Government fund. So, what’s the difference between SHY and GOVT? And which fund is better?

The expense ratio of SHY is 0.10 percentage points higher than GOVT’s (0.15% vs. 0.05%). SHY is mostly comprised of AAA bonds and GOVT has a high exposure to AAA bond. Overall, SHY has provided lower returns than GOVT over the past 8 years.

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

Summary

SHY GOVT
Name iShares 1-3 Year Treasury Bond ETF iShares U.S. Treasury Bond ETF
Category Short Government Intermediate Government
Issuer iShares iShares
AUM 19.51B 17.07B
Avg. Return 1.27% 2.67%
Div. Yield 0.46% 1.0%
Expense Ratio 0.15% 0.05%

The iShares 1-3 Year Treasury Bond ETF (SHY) is a Short Government fund that is issued by iShares. It currently has 19.51B total assets under management and has yielded an average annual return of 1.27% over the past 10 years. The fund has a dividend yield of 0.46% with an expense ratio of 0.15%.

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%.

SHY’s dividend yield is 0.54% lower than that of GOVT (0.46% vs. 1.0%). Also, SHY yielded on average 1.40% less per year over the past decade (1.27% vs. 2.67%). The expense ratio of SHY is 0.10 percentage points higher than GOVT’s (0.15% vs. 0.05%).

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Fund Composition

Holdings

SHY - Holdings

SHY Bond Sectors Weight
AAA 99.67%
Others 0.33%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

SHY’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.67%, 0.33%, 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.

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.

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Risk Analysis

SHY GOVT
Mean Return 0.09 0
R-squared 39.11 0
Std. Deviation 0.89 0
Alpha -0.03 0
Beta 0.18 0
Sharpe Ratio 0.54 0
Treynor Ratio 2.6 0

The iShares 1-3 Year Treasury Bond ETF (SHY) has a Standard Deviation of 0.89 with a Alpha of -0.03 and a Sharpe Ratio of 0.54. Its R-squared is 39.11 while SHY’s Treynor Ratio is 2.6. Furthermore, the fund has a Beta of 0.18 and a Mean Return of 0.09.

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

SHY’s Mean Return is 0.09 points higher than that of GOVT and its R-squared is 39.11 points higher. With a Standard Deviation of 0.89, SHY is slightly more volatile than GOVT. The Alpha and Beta of SHY are 0.03 points lower and 0.18 points higher than GOVT’s Alpha and Beta.

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Performance

Annual Returns

SHY vs. GOVT - Annual Returns

Year SHY GOVT
2020 3.01% 7.92%
2019 3.42% 6.71%
2018 1.45% 0.74%
2017 0.27% 2.19%
2016 0.75% 0.92%
2015 0.43% 0.76%
2014 0.48% 4.99%
2013 0.23% -2.84%
2012 0.31% 0.0%
2011 1.43% 0.0%
2010 2.23% 0.0%

SHY had its best year in 2019 with an annual return of 3.42%. SHY’s worst year over the past decade yielded 0.23% and occurred in 2013. In most years the iShares 1-3 Year Treasury Bond ETF provided moderate returns such as in 2014, 2016, and 2011 where annual returns amounted to 0.48%, 0.75%, and 1.43% 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

SHY vs. GOVT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
SHY $10,000 $11,043 1.27%
GOVT $10,000 $12,297 2.67%

A $10,000 investment in SHY would have resulted in a final balance of $11,043. This is a profit of $1,043 over 8 years and amounts to a compound annual growth rate (CAGR) of 1.27%.

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%.

SHY’s CAGR is 1.40 percentage points lower than that of GOVT and as a result, would have yielded $1,254 less on a $10,000 investment. Thus, SHY performed worse than GOVT by 1.40% annually.


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