Better iShares Bond ETF: IEI vs. MUB
Key Points
IEI carries a higher expense ratio and a slightly higher yield than MUB.
MUB outperformed IEI over the past year and five-year period, but IEI holds up well in risk-adjusted terms.
Both ETFs focus on high-grade U.S. bonds, but MUB invests in municipal bonds while IEI targets intermediate Treasuries.
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The iShares National Muni Bond ETF (NYSEMKT:MUB) and iShares 3-7 Year Treasury Bond ETF (NASDAQ:IEI) differ in cost, yield, and bond exposure, with MUB focusing on municipal bonds and IEI on intermediate-term Treasuries, each offering distinct risk-return profiles for fixed income investors.
MUB and IEI both come from iShares and provide exposure to high-quality U.S. bonds, but there are key differences. MUB invests in a broad mix of municipal bonds, making it appealing to those seeking potential tax advantages, while IEI tracks U.S. Treasury bonds with maturities of three to seven years.
This comparison breaks down cost, yield, performance, and portfolio composition to help highlight which fund may fit different portfolio needs.
Snapshot (cost & size)
| Metric | MUB | IEI |
|---|---|---|
| Issuer | IShares | IShares |
| Expense ratio | 0.05% | 0.15% |
| 1-yr return (as of 2026-04-09) | 6.9% | 4.3% |
| Dividend yield | 3.2% | 3.6% |
| Beta | 0.9 | 0.7 |
| AUM | $42.6 billion | $18.7 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months.
IEI comes with a higher expense ratio, making MUB the more affordable choice on fees, but IEI offers a slightly higher dividend yield, which could appeal to investors prioritizing income.
Performance & risk comparison
| Metric | MUB | IEI |
|---|---|---|
| Max drawdown (5 y) | -11.89% | -13.88% |
| Growth of $1,000 over 5 years | $1,048 | $1,025 |
What's inside
IEI tracks U.S. Treasury bonds with maturities between three and seven years and holds 83 securities, making it a concentrated play on intermediate-term government debt. Its largest positions, such as Treasury Note 05/15/2029, Treasury Note 11/30/2030, and Treasury Note 02/28/2030, are all U.S. government issues, reflecting a portfolio focused on safety and interest rate risk. The fund has been around for over 19 years, providing a long track record for investors to evaluate.
MUB, on the other hand, provides exposure to a broad mix of investment-grade municipal bonds, with top holdings like the state of California, city of New York, and the New Jersey Transportation trust fund. Both MUB and IEI are fixed income funds with no equity sector breakdown, focusing solely on fixed income quality.
For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
In comparing the iShares National Muni Bond ETF (MUB) and iShares 3-7 Year Treasury Bond ETF (IEI), the choice between them depends on individual financial goals, since each serves different investor needs.
MUB combines a lower expense ratio with interest payments generally exempt from federal and some state taxes to provide an attractive source of income. The tax-exempt component is a particular advantage for high-income investors. It also sports a much higher AUM of $42.6 billion, and broad diversification in municipal bonds to reduce risk. But it is more volatile than IEI as indicated by its higher beta.
IEI is the superior choice for investors seeking high safety and stability. Also, its interest is generally exempt from state and local taxes, making it a compelling ETF for investors in high-tax states. But the trade-off is a greater cost and a lower one-year return.
MUB is a good ETF for high-income investors, but it would not be an ETF to add to a retirement account, such as an IRA, if you want to take advantage of the tax benefits. IEI is for those who prioritize safety and low volatility although the income is subject to federal income tax.
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Robert Izquierdo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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