Treasuries vs. Corporate Debt: A Question of Appetite

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The intermediate-term bond market presents a familiar dilemma: security versus reward. One may opt for the blandishments of U.S. Treasuries, or venture into the slightly more raffish world of corporate debt. The iShares 3-7 Year Treasury Bond ETF (IEI 0.04%) and the iShares 5-10 Year Investment Grade Corporate Bond ETF (IGIB +0.06%) offer precisely these choices, though one suspects the average investor approaches such matters with the same degree of discernment as a duchess selecting a footman.

A brief accounting, for those inclined towards such vulgar displays of arithmetic:

Metric IGIB IEI
Issuer iShares iShares
Expense Ratio 0.04% 0.15%
1-yr Return (as of Feb. 7, 2026) 3.77% 2.61%
Dividend Yield 4.6% 3.51%
AUM $17.90 billion $17.89 billion

Beta, a measure of volatility relative to the S&P 500, is a statistic best left to those who believe numbers can explain the inexplicable. The one-year return, however, is a simple enough proposition: what one receives for one’s patience.

IGIB, predictably, boasts a lower expense ratio and a more generous dividend yield. Both distribute dividends monthly, a comforting regularity in these unpredictable times.

A comparison of performance and risk reveals a predictable pattern. Over five years, IGIB experienced a maximum drawdown of -20.61%, while IEI fared better at -13.89%. A hypothetical investment of $1,000 in IGIB would yield $878 after five years, compared to $898 for IEI. A modest difference, perhaps, but sufficient to fund a decent bottle of claret.

IEI, in its austere simplicity, holds 87 positions exclusively in U.S. Treasury bonds maturing in three to seven years. A bastion of safety, one might say, though safety rarely comes without a price. The bonds are, naturally, AA-rated, the second-highest designation. One pictures a portfolio manager meticulously polishing these instruments, as if they were family heirlooms.

IGIB, by contrast, is a more sprawling affair, encompassing 2972 holdings across the U.S. investment-grade corporate bond universe, with maturities between five and ten years. The issuers include such titans as Meta (META 1.31%), Bank of America (BAC +2.89%), and Wells Fargo (WFC +2.53%). A slightly more adventurous proposition, though one wonders if these companies will still be titans in a decade.

For those seeking further guidance on ETF investing, a comprehensive guide awaits at [link]. One assumes it is as enlightening as it is lengthy.

IGIB, with its higher returns, dividends, and lower expense ratio, appears the more attractive option. However, one must not mistake a slightly larger slice of the pie for a guarantee of satisfaction. IGIB holds corporate bonds, with a near-equal allocation to A- and BBB-rated instruments, and a mere six percent rated AA. IEI, meanwhile, holds only AA bonds backed by the U.S. government. The difference, put simply, is one of appetite for risk.

As bond ratings decline, yields and returns increase, reflecting the inherent risk. Choosing between these two ETFs, therefore, hinges on one’s tolerance for volatility. One might observe that the bond market rarely offers the exhilarating highs (or crushing lows) of the stock market. Patience, as always, is paramount. One should not anticipate substantial gains within a year unless a truly catastrophic event unfolds. Such events, of course, are always possible, and one must be prepared for anything.

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2026-02-08 17:02