The iShares Core US Aggregate Bond ETF (AGG) provides broader exposure across U.S. fixed income markets compared to the iShares 3-7 Year Treasury Bond ETF (IEI), offering investors enhanced diversification benefits despite overlapping maturity profiles.
- AGG holds over 10,000 securities; IEI holds approximately 1,400 Treasury instruments
- AGG allocates 52% to corporate bonds, while IEI is 100% invested in U.S. Treasuries
- AGG’s current yield: 3.9%; IEI’s current yield: 3.8%
- AGG has an expense ratio of 0.04%, IEI at 0.03%
- No single security in AGG exceeds 0.5% weight; IEI faces higher concentration risk in large Treasuries
- Duration profile is nearly identical: AGG at 5.1 years, IEI at 5.0 years
The iShares Core US Aggregate Bond ETF (AGG) stands out for its diversified approach within the U.S. fixed income landscape, encompassing a wide range of investment-grade bonds including Treasuries, corporate debt, mortgage-backed securities, and agency bonds. In contrast, the iShares 3-7 Year Treasury Bond ETF (IEI) is focused exclusively on U.S. government debt with maturities between three and seven years. This structural distinction results in AGG’s portfolio spanning over 10,000 distinct securities, while IEI holds approximately 1,400 Treasury notes and bonds. AGG’s broad composition leads to lower sector concentration risk; as of recent data, the fund allocates roughly 28% to U.S. Treasuries, 52% to corporate bonds, and 16% to mortgage-backed and agency securities. IEI, by design, maintains nearly 100% exposure to U.S. Treasuries. While both funds exhibit similar duration profiles—AGG at approximately 5.1 years and IEI at around 5.0 years—the diversification advantage of AGG becomes evident during periods of rising credit spreads or market volatility. Investors seeking stability with moderate yield enhancement may find AGG more attractive, particularly given its current yield of 3.9% versus IEI's 3.8%. Additionally, AGG's expense ratio of 0.04% remains competitive, though slightly higher than IEI’s 0.03%. The broader underlying pool also reduces single-security risk, with no individual holding exceeding 0.5% of net assets in AGG, compared to IEI’s potential for higher concentration in large Treasury issues. Market participants, especially those managing long-term portfolios, are likely to favor AGG for its resilience across varying economic cycles. Institutions and retail investors alike can benefit from AGG’s balance of yield, credit diversity, and liquidity, making it a more versatile tool in multi-sector bond allocation strategies.