Under The Hood: Short Term Bond ETFs

May 30, 2018

Not All Short-Duration ETFs Created Equal

SHV, BIL, MINT and NEAR are by no means the only ETFs in the ultra-short-term bond space. There are a number of funds that provide low-duration exposure. Some exclusively hold Treasuries; others take on riskier debt. Some limit their maturities to one year or less; others hold longer maturities.

Generally, fixed-income instruments with maturities of less than five years are considered short term, while instruments with maturities of less than one year are considered ultra-short term.

Wading away from Treasuries may boost yields but adding credit risk. Taking on longer maturities may add yield at the expense of greater interest rate risk.

“Not all short duration ETFs are created equal. They all have their own risk and return profiles,” said Kelly Ye, director of research for IndexIQ. “The majority of the short-duration ETFs are composed of short maturity bonds, which still have some interest rate risk. Floating-rate ETFs can benefit from a rising rate environment, but they’re subjected to liquidity, credit and call risk. Interest-rate-hedged products could subject investors to curve risk.”

According to Ye, there is no “one size fits all” ETF for investors.

“Short-duration Treasury ETFs are good for investors looking for cash equivalent and value safety above all,” she added, “while short-duration corporate bond/bank loan ETFs are for investors willing to take credit risk to pick up incremental yield.”

Things To Consider

With dozens of short-term and ultra-short-term bond ETFs on the market, investors must do their due diligence to determine which product is right for them.

Jordan Farris, managing director of ETF product development for Nuveen, recommends investors consider funds that offer an attractive yield—something that will generally outpace inflation—and minimizes interest rate risk while still achieving income objectives.

Meanwhile, CLS’ Jenkins advises that investors have a clear vision of what they want out of their allocation to short-term bonds.

“Some decision points to help narrow the available options include active versus passive, fixed versus floating, one year or less versus one- to three-year maturity, and government versus spread sector, he explained. “These decisions will impact expected risk and return. Other factors to analyze include cost, liquidity, portfolio construction, tracking error (for passive ETFs), and manager process and philosophy (for active ETFs).”

Most Popular Short-Term Bond ETFs Of 2018

For a list of the short-term bond ETFs that are seeing the most interest this year, see the table below. Also, check out the ETF.com channels on short-term and ultra-short-term bond ETFs.


Ticker Fund YTD Inflows ($M)
SHV iShares Short Treasury Bond ETF 5,878
FLOT iShares Floating Rate Bond ETF 2,870
SHY iShares 1-3 Year Treasury Bond ETF 2,589
BIL SPDR Bloomberg Barclays 1-3 Month T-Bill ETF 1,454
FLRN SPDR Bloomberg Barclays Investment Grade Floating Rate ETF 1,323
MINT PIMCO Enhanced Short Maturity Active ETF 1,300
NEAR iShares Short Maturity Bond ETF 905
ISTB iShares Core 1-5 Year USD Bond ETF 793
SPSB SPDR Portfolio Short Term Corporate Bond ETF 765
BSV Vanguard Short-Term Bond ETF 692
FTSM First Trust Enhanced Short Maturity ETF 666
JPST JPMorgan Ultra-Short Income ETF 606
SCHO Schwab Short-Term US Treasury ETF 557
VGSH Vanguard Short-Term Treasury Index ETF 521
STIP iShares 0-5 Year TIPS Bond ETF 418
GBIL Goldman Sachs TreasuryAccess 0-1 Year ETF 340
LMBS First Trust Low Duration Opportunities ETF 331
SHYG iShares 0-5 Year High Yield Corporate Bond ETF 309
VTIP Vanguard Short-Term Inflation-Protected Securities ETF 300
SHM SPDR Nuveen Barclays Short Term Municipal Bond ETF 255

Data measures the year-to-date period through May 24, 2018.


Email Sumit Roy at [email protected] or follow him on Twitter sumitroy2

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