Vanguard’s BSV ETF offers a lower expense ratio, higher yield, and tighter tracking error compared to iShares’ ISTB, making it a more efficient choice for investors seeking high-quality short-term bonds in a volatile rate environment.
- BSV’s expense ratio is 0.04%, compared to ISTB’s 0.15%
- BSV’s 12-month yield is 4.87%, exceeding ISTB’s 4.63%
- BSV’s tracking error is 0.03% vs. ISTB’s 0.09%
- BSV has higher average daily trading volume (1.3M shares)
- Both ETFs focus on U.S. Treasury securities with intermediate maturity
- Lower costs and tighter tracking support better risk-adjusted returns
Vanguard’s Intermediate-Term Treasury ETF (BSV) has emerged as a stronger option than iShares’ Short-Term Treasury Bond ETF (ISTB) for investors prioritizing cost efficiency and performance in the short-term U.S. Treasury space. BSV, with a 0.04% expense ratio, significantly undercuts ISTB’s 0.15%, translating to meaningful long-term savings for investors. Over the past 12 months, BSV delivered a yield of 4.87%, outpacing ISTB’s 4.63%, despite both ETFs tracking similar underlying indices of U.S. Treasury securities with maturities between 2 and 10 years. The divergence in performance extends beyond yield and fees. BSV’s average annual tracking error—measuring deviation from its benchmark—stands at 0.03%, compared to ISTB’s 0.09%, indicating superior index replication. This precision reduces unintended risk and enhances portfolio predictability. Additionally, BSV’s average daily trading volume exceeds 1.3 million shares, reflecting stronger liquidity and tighter bid-ask spreads, which benefit active traders and institutional investors alike. These metrics place BSV at a distinct advantage in the current interest rate environment, where capital preservation and consistent income are paramount. With the Federal Reserve maintaining elevated rates, demand for high-grade fixed-income instruments remains robust, and ETFs with low costs and reliable performance are increasingly favored. The comparison underscores a broader trend: investors are increasingly favoring ETFs with lower expense ratios and better tracking accuracy, particularly in passive fixed-income strategies.