Investors Searching for Safe Havens Flock to T-Bill ETFs

Treasury note yields remain attractive, experts say.

Reviewed by: Shubham Saharan
Edited by: Shubham Saharan

Investors rebuking risk are flocking to safe assets like short-term bond exchange-traded funds as concerns that the Federal Reserve will keep rates higher for longer fail to subside. 

ETFs focused on short-duration Treasuries are hauling in their most in years as investors parse a mixed basket of economic data, which mostly indicates the Federal Reserve will raise interest rates and keep them high for longer than previously expected.  

Investors, as a result, are crowding into cash alternatives such as short duration Treasury bill ETFs.  

The three top ETFs last week in terms of inflows were the iShares Short Treasury Bond ETF (SHV), the SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) and the iShares 0-3 Month Treasury Bond ETF (SGOV), which in total brought in nearly $6 billion, according to data. For SHV, last week’s nearly $3 billion intake was the fund’s largest weekly haul since March 2020, according to Bloomberg data.

U.S. traders are anticipating the Federal Reserve will boost interest rates to 5.4% this year, compared with about 5% just a month ago, Bloomberg data shows. The Fed is now expected to begin easing interest rates in 2024, while earlier predictions had them cut at the end of 2023, that data shows.  

Federal Reserve officials are cautioning that the U.S. economy is running too hot for their liking.  

“The level of inflation matters, and it is still too high,” Loretta Mester, president of the Federal Reserve Bank of Cleveland, said in an appearance at the U.S. Monetary Policy Forum on Friday, reiterating the central bank’s commitment to bring inflation down to their 2% target.  

The reconsideration of the central bank’s path forward has investors selling stocks and reducing risk in  their portfolios.  

“What you are seeing is investors speak with their feet a little bit, and saying we're not going to take any risk premium here, duration or credit, and we're going to move our funds into something kind of cash,” Komson Silapachai, partner of Research & Portfolio Strategy at Austin, Texas-based Sage Advisory Services, said in an interview with  

He added that the yields the risk-free assets are currently offering are attracting investors.  

Yields on short duration Treasury bills such as the one-, three- and six-month notes hit 4.6%, 4.9% and 5.1%, respectively. On Monday, the yield on the policy-sensitive two-year Treasury bill hit 4.8%, its highest level since 2007. Yields rise as prices fall.   

Investors are also shying away from riskier fixed income assets despite their higher yields.  



Junk bond and investment-grade ETFs also lost investor funds. The once-popular SPDR Bloomberg High Yield Bond ETF (JNK) and the iShares iBoxx USD High Yield Corporate Bond ETF (HYG), collectively shed nearly $2.9 billion last week. Even the relatively safer iShares iBoxx USD Investment Grade Corporate Bond ETF (LQD) wasn’t immune, as the fund bled nearly $1 billion in the week ending Feb. 24.  

“There's a lot more value in high yield, but it's not necessarily the value you're getting. It’s still very rich relative to where it's been in the past,” Silapachai said, pointing to tight spreads between yields on junk bonds and Treasury bills. Historically, he said, the difference has been greater than the 400 basis points seen right now.  

Yet these outflows come after investors piled into high yield ETFs at the end of 2022. JNK pulled in $3.4 billion in the last six months of 2022, while HYG took in $3.8 billion in the same time period, according to data.    


Contact Shubham Saharan  at [email protected]  

Shubham Saharan is a markets reporter at Before joining the company, she reported for Bloomberg and the Financial Times. Saharan is a graduate of Barnard College of Columbia University.