# XBB vs VAB



## Murph (Sep 9, 2009)

Hi, I was wondering if someone could clarify the principle differences between ishares XBB and vanguard VAB bond funds? I currently own VAB and have seen significant performance differences in closing price between both efts even though they have similar holdings and durations. For example yesterdays closing price had a spread of 50 basis points between the two and I'm just wondering what I am missing ?? I thought both funds were supposed to be quite similar ?


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## james4beach (Nov 15, 2012)

Murph said:


> Hi, I was wondering if someone could clarify the principle differences between ishares XBB and vanguard VAB bond funds? I currently own VAB and have seen significant performance differences in closing price between both efts even though they have similar holdings and durations. For example yesterdays closing price had a spread of 50 basis points between the two and I'm just wondering what I am missing ?? I thought both funds were supposed to be quite similar ?


As I understand it, you're looking at their daily % movements and observing that yesterday XBB price change was +0.44% while VAB was -0.04%. The first complication you'll find with comparisons like these are that it's only safe to compare the NAV changes. According to the fund web sites, on April 5 the NAV of XBB changed +0.25% and VAB changed +0.26% which are indeed very similar.

So why the NAV vs price difference?

One factor is that in general, bond funds are not extremely liquid and there are usually small differences between the NAV and share price. It's not like a stock ETF where you know precisely each underlying stock price to the pennny. Bond ETF prices don't track NAV as well as stock ETFs can. Corporate bonds are usually to blame, as they're not as liquid as government bonds.

Another factor is distribution practices. I think (but am not certain on the accounting) that share price can move away from NAV temporarily as those internal cashflow operations are happening.


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## phrenk (Mar 14, 2011)

Maybe its me, but from their respective websites, both of the ETF do not track the same Bond Index, XBB tracks a DEX bond index and the other some Barclays Index. I'm no index expert, but my intuition is probably that deviations are mainly due to the difference in the underlying bonds in the different indexes since you're not comparing apples to apples.


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## Murph (Sep 9, 2009)

james4beach said:


> As I understand it, you're looking at their daily % movements and observing that yesterday XBB price change was +0.44% while VAB was -0.04%. The first complication you'll find with comparisons like these are that it's only safe to compare the NAV changes. According to the fund web sites, on April 5 the NAV of XBB changed +0.25% and VAB changed +0.26% which are indeed very similar.
> 
> So why the NAV vs price difference?
> 
> ...


Thanks for the reply James, I kind of figured it had something to do with the NAV of the funds and the liquidity, I just found it a little weird that they have similar compositions but have different daily performances...


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