Understanding the iShares 3-7 Year Treasury Bond ETF (IEI)

What this ETF is trying to do

The iShares 3-7 Year Treasury Bond ETF (IEI) is an exchange-traded fund that focuses on U.S. Treasury bonds with maturities between three and seven years.

What the numbers show

When looking at an ETF, it is important to know the difference between "price return" and "total return." Price return only tracks how much the share price changes. Total return includes both the price change and any cash payments (distributions) made to investors.

Based on the data provided:

• Year-to-Date (YTD): The price return is approximately -4.28%. However, the YTD total return is -1.89%.

• One Year: The one-year price return is approximately -4.55%, while the one-year total return is approximately -0.99%.

• Three Years: The three-year price return is approximately 0.47%, but the three-year total return is much higher at approximately 11.10%.

To visualize the price change, we can look at an estimated price from roughly one year ago, which was about $119.69. The current price is $114.24.

Income and distribution explanation

This ETF provides cash distributions to investors. The distribution yield is approximately 3.79%. These payments usually happen monthly, with the most common payout day being Monday. Over the last 12 months, there were 12 distributions totaling approximately $4.33 per share.

It is important to remember that a distribution yield tells you how much cash was paid out relative to the price, but it is not the same thing as your total return.

NAV erosion explanation

"NAV erosion" refers to a decline in the Net Asset Value (the actual value of the assets held by the fund). While a falling share price can sometimes look like erosion, they are not always the same thing.

For this ETF, the erosion-risk score is 94, which is labeled as "Stable / sideways." The erosion severity is rated as "good," and there is no severe erosion-risk flag present.

Pros

• The fund has a "B" grade income rating.

• The three-year total return shows a positive gain of approximately 11.10%.

• The erosion-risk measurements suggest the fund is currently stable.

Cons

• Both the year-to-date and one-year price returns have been negative.

• The total return for the past year has also been negative.

Beginner takeaway

When studying IEI, notice how the total return is higher than the price return. This happens because the cash distributions help offset some of the share-price declines. Always look at both numbers to get a full picture of how an ETF is performing.