A US exchange-traded fund that holds solely Treasury payments is on the cusp of reaching the $100 billion mark — greater than double the scale of its closest competitor — as buyers flock to merchandise providing publicity to rising US rates of interest.
BlackRock Inc.’s iShares 0-Three Month Treasury Bond ETF has attracted nearly $30 billion this 12 months, greater than another bond ETF, boosting its property to $99 billion, in line with knowledge compiled by Bloomberg. It’s larger than all however about 25 money-market funds, the most important of which, Constancy Authorities Cash Market Fund, held about $456 billion as of June 30.
Progress in money-market funds — whose mixed property have exceeded $Eight trillion, greater than double their 2020 degree — and Treasury invoice ETFs testifies to the attraction of US short-term rates of interest which might be anticipated to rise. And it’s been made potential by the enlargement of US authorities borrowing, notably within the type of payments.
“It’s actually accelerated,” Steve Laipply, international co-head of iShares Mounted Revenue ETFs at BlackRock, stated concerning the fund’s development. “Buyers view it as a spot to earn yield whereas they’re making an attempt to resolve their subsequent steps in allocation.”
Regardless of six interest-rate cuts by the Federal Reserve over the previous two years placing downward stress on the rates of interest paid by Treasury payments and dividends of the funds that maintain them, money has outperformed bonds and offered a buffer from US inventory market benchmarks close to document highs.
Three-month Treasury invoice yields are round 3.8%, down from multiyear highs close to 5.5% reached in 2023. They’ve climbed from underneath 3.6% in the beginning of the 12 months, nevertheless, in anticipation of a minimum of one interest-rate enhance by the Fed over the subsequent 12 months to fight inflation that has continued exceeding its 2% goal.
Whereas buyers in short-term rate of interest merchandise like cash market funds and Treasury invoice ETFs can profit from Fed fee will increase, longer-maturity bond funds usually tend to be harm by expectations for rising charges, as their fixed-rate holdings mature much less continuously.
That has harm returns from bonds, together with elevated inflation and the prospect of enlargement within the provide of Treasury notes and bonds to satisfy development within the US borrowing want. A thousand {dollars} invested 5 years in the past in Bloomberg’s US Combination Bond Index — whose company bond part additionally has seen explosive development in recent times — was price solely about $1,004 as of June 30, whereas the identical quantity invested in Treasury payments was price practically $1,200.
And payments are on tempo to outperform bonds for the fifth time in six years, returning about 1.9% thus far this 12 months, whereas the broader bond index is little modified. The phrase “T-bill and chill” has entered Wall Road’s lexicon as shorthand for incomes yields with minimal danger.
Two different BlackRock ETFs that spend money on the riskier corners of the bond market have recorded the most important outflows amongst fixed-income ETFs this 12 months. Buyers have pulled $3.2 billion from each the iBoxx USD Excessive Yield Company Bond ETF and the 20+ 12 months Treasury Bond ETF.
The important thing distinction between T-bill ETFs and cash market funds that maintain solely Treasury payments issues share value. Cash‑market funds keep a secure $1 share value, with dividends paid out as revenue reasonably than lowering internet asset worth. Treasury‑invoice ETFs commerce intraday, so their costs alter when dividends are distributed. The iShares fund’s share value over the previous 12 months has ranged from $100.28 to $100.74.
Expense ratios are usually greater for actively managed money-market funds than for ETFs. The typical expense ratio for cash market funds was about 0.24% in 2025, in line with the Funding Firm Institute. The iShares Treasury invoice ETF’s is 0.09%.
Not like cash‑market funds, Treasury‑invoice ETFs usually alter to modifications briefly‑time period rates of interest extra step by step as a result of their portfolios reset solely as underlying payments mature. That may depart them trailing money-market funds when the Fed is actively elevating charges.
Since its Might 2020 launch, the BlackRock fund has grown extra shortly than another bond ETF. With inflows averaging about $1 billion per week this 12 months, it’s turn into the ninth-largest US bond fund, together with ETFs and mutual funds aside from money-market funds.
Compared, BlackRock’s flagship bond ETF — the $139 billion iShares Core US Combination Bond ETF — took 20 years to succeed in the $100 billion mark.
“Charges are a little bit greater, they usually’ll stay greater for longer,” stated Tony Rodriguez, head of fixed-income technique at Nuveen Asset Administration. “We’re speaking about 3% to 4% charges on the quick finish for some time.”