Treasury Yields Outpace Municipal Bonds

Vanguard’s VGIT ETF offers a 4.0% dividend yield. This exceeds the 3.3% yield from iShares’ MUB fund. The difference is 0.7 percentage points. Investors are shifting focus toward fixed income. Inflation concerns keep interest rates elevated. Bond yields now outperform average S&P 500 dividends.

MUB focuses on tax-advantaged municipal bonds. VGIT holds intermediate-term U.S. Treasuries. Both serve as core portfolio holdings. The choice depends on tax bracket and risk tolerance. VGIT carries lower credit risk. MUB offers potential tax benefits for high earners.

Cost and Size Comparison

VGIT charges a 0.03% expense ratio. MUB charges 0.05%. VGIT manages $48.3 billion in assets. MUB manages $44.7 billion. Both funds are large and liquid. The cost difference is 2 basis points. VGIT’s lower fee structure benefits long-term holders.

Performance and Risk Metrics

MUB returned -0.02% over the past year. VGIT returned -1.0% over the same period. MUB’s five-year max drawdown was 11.9%. VGIT’s drawdown reached 16.0%. MUB has a beta of 0.91. VGIT’s beta is 0.78. Lower beta indicates less volatility relative to the S&P 500.

A $1,000 investment in MUB grew to $1,008 over five years. The same amount in VGIT dropped to $983. MUB holds 7,063 individual bonds. No single position exceeds 2% of the fund. VGIT holds 102 Treasury notes. This concentration reflects the limited number of government issuers.

Tax Implications Drive Choice

Municipal bond interest is often exempt from federal tax. This benefit grows with higher income brackets. VGIT distributions are fully taxable. According to GN auto markets/bonds: treasury yields, tax status often outweighs raw yield. High-bracket investors may prefer MUB. Lower-bracket investors gain more from VGIT’s higher payout.