Key Highlights

Three ETFs give investors exposure to Australian government bonds: iShares Treasury ETF (ASX:IGB), State Street SPDR S&P/ASX iBoxx Australian Government Bond ETF (ASX:GOVT) and Betashares Australian Government Bond ETF (ASX:AGVT). All three hold only Australian government issuers, so their differences come down to maturity focus, costs and turnover rather than Credit risk.

Measure

ASX:IGB

ASX:GOVT

ASX:AGVT

Listed price

$97.26

$24.19

$40.69

Fund size

Not shown

$147.23 million

$1.16 billion

Management fee

0.18%

0.10%

0.22%

Listed annual yield

2.61%

3.06%

4.41%

Holdings

31

120

79

Turnover

19%

82.24%

18.62%

Maturity and portfolio focus

ASX:IGB tracks the Bloomberg AusBond Treasury index across the maturity range, and its top ten holdings make up 50.97% of the fund. ASX:GOVT tracks the S&P/ASX iBoxx Australian and State Government index, covering both Commonwealth and state issuers, with the top ten at 29.62%. ASX:AGVT concentrates on the 7 to 12 year band, which gives it a noticeably different Interest Rate profile.

In practice, ASX:AGVT's narrower maturity band means its yield is higher, and its price responds to rate moves in the medium term more than the broader funds.

Costs, turnover and yield

ASX:GOVT has the lowest fee at 0.10%, but its turnover of 82.24% is high, which means the portfolio is changed considerably over time and trading costs may be higher. ASX:IGB charges 0.18% with turnover of 19%, while ASX:AGVT charges 0.22% with turnover of 18.62%.

The listed yields follow the maturity focus. ASX:AGVT offers the highest yield, at 4.41%, while ASX:IGB's yield of 2.61% is the lowest of the three.

Risks to weigh

All three funds carry interest rate risk, and longer maturities are more sensitive to rate changes. Because each holds only Commonwealth or state issuers, credit risk is low, but the funds are fully exposed to the rate cycle. ASX:AGVT includes some Canadian and supranational holdings, which adds currency and foreign issuer considerations.

The high turnover of ASX:GOVT and the concentration of ASX:IGB in a few large issues are further points to weigh.

Final Word

The three government bond funds share the same credit profile but differ in maturity focus, cost and yield. ASX:AGVT offers the highest yield through a medium-term focus, ASX:GOVT the lowest fee with higher turnover, and ASX:IGB the lowest yield with concentrated holdings.