Government Bond ETFs and Their Underlying Indexes – BSV, BIV,and GVI

Governments bond ETFs, by name, one knows they have the endorsement from the governments; therefore, the credit risk is extremely low. Categorized under this umbrella by, there are three largest ETFs: BSV, BIV, and GVI.

BSV, The Vanguard Short-Term Bond ETF, issued in April 2007 by Vanguard, has since amassed $21.91 billion AuM, containing 2446 holding securities. The expense ratio is much lower than those muni bond ETFs: 0.07% versus 0.20% or so. It tracks Bloomberg Barclays U.S. 1-5 Year Government/Credit Float Adjusted Index. This index includes all medium and larger issues of U.S. government, investment-grade corporate, and investment-grade international dollar-denominated bonds that have maturities of between 1 and 5 years and are publicly issued. The fund BSV is created by sampling, meaning that it holds a representative list of securities that overall mimicking the entire component debts of the full index, displaying key risk factors and business characteristics but not a full replication of the index constituents.  Under normal circumstances, the fund’s dollar-weighted average maturity is not expected to exceed 3 years. The performance of these funds so far is a 5-year return rate of 1.26% and 3-year return rate of 1.4%.

BIV, The Vanguard Intermediate-Term Bond Fund, issued by Vanguard too at the same time – April 2007, aiming the intermediate-term bonds instead of BSV’s short-term bonds. It has $13.55 billion assets now. Same expense ratio 0.07%, similar liquidity measured by Average Spread of 0.05%. It holds 1981 securities and tracks Bloomberg Barclays U.S. 5-10 Year Government/Credit Float Adjusted Index, which applies a stringent rule of excluding bonds with maturities of under 5 years or over 10. This fund yields a good 3-year return at 3.53% and 5-year return at 2.98%.

GVI, iShares Intermediate Government/Credit Bond ETF, issued by BlackRock in January 2007, has accumulated $2.45 billion AuM. Its expense ratio is high at 0.20%, almost three-fold higher than that of Vanguard’s rival products BSV and BIV. It holds 2577 securities, annualized 3-year return is 1.95% and 5-year return is 1.69%. It tracks Bloomberg Barclays U.S Intermediate Government/Credit Bond Index.

Let’s compare their price performance over the years.

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